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Friday, July 29, 2011

Imperialist AMERICA is on the verge of Bankruptcy! I had been writing from the very beginning that the RECESSION is all about WAR ECONOMY Crisis diluted as Sub Prime Crisis.Hence, the sustenace of Corpoarte Imperialism depends of Great South Asian Ma

Imperialist AMERICA is on the verge of Bankruptcy! I had been writing from the very beginning that the RECESSION is all about WAR ECONOMY Crisis diluted as Sub Prime Crisis.Hence, the sustenace of Corpoarte Imperialism depends of Great South Asian Market of War and Civil War.Thus, the Strategic Realliance and INDO US Nuclear Deal are the best ESCAPE AVENUE for the Rulers of the Galaxy. Since Vietnam, US Economy is INFLICTED with War. It SURVIVED but the Partner of COLD War, USSR DISINTEGRATED. It was NOT and Ideological Failure but an outright Economic Collapse of Military Socialist Imperialism. Unfortunately, the Zionist Brahamin Rulres INVOLVED India in the Suicidal War Game and the War against Terror to SPACE ADVENTURE via Steep Hike in Defence and Internal Security puts us in the SAME Trap!I have dealt this issue episode by episode in my Novel AMERICA SE SAVDHAN, Be AWARE of America, which went abegging , quite UNNOTICED!

Indian Holocaust My Father`s Life and Time - SIX HUNDRED  NINETY SIX

Palash Biswas

Imperialist AMERICA is on the verge of Bankruptcy! I had been writing from the very beginning that the RECESSION is all about WAR ECONOMY Crisis diluted as Sub Prime Crisis.Hence, the sustenace of Corpoarte Imperialism depends of Great South Asian Market of War and Civil War.Thus, the Strategic Realliance and INDO US Nuclear Deal are the best ESCAPE AVENUE for the Rulers of the Galaxy. Since Vietnam, US Economy is INFLICTED with War. It SURVIVED but the Partner of COLD War, USSR DISINTEGRATED. It was NOT and Ideological Failure but an outright Economic Collapse of Military Socialist Imperialism. Unfortunately, the Zionist Brahamin Rulres INVOLVED India in the Suicidal War Game and the War against Terror to SPACE ADVENTURE via Steep Hike in Defence and Internal Security puts us in the SAME Trap!I have dealt this issue episode by episode in my Novel AMERICA SE SAVDHAN, Be AWARE of America, which went abegging , quite UNNOTICED!

America On The Verge Of Bankruptcy

Jakarta - A Republican plan to cut the budget deficit stumbled toward a vote in Congress on Thursday and its expected demise could force a compromise to avert an imminent and unprecedented debt default by the world's largest economy.

With the measure short of as many as four votes, according to aides, the Republican-led House of Representatives abruptly delayed a vote as Speaker John Boehner struggled to overcome objections from conservative rebels in his own party.

Republican Representative Mick Mulvaney, a supporter of the Tea Party movement that demands even deeper spending cuts, said he still would vote against the bill as he left Boehner's office to pray at the congressional chapel.

"I'm still a no," he said.

World markets, unnerved by the risk of a U.S. default or credit downgrade, watched anxiously. The U.S. stock market's broad S&P 500 index fell for a fourth day and interest rates soared on some Treasury bills that mature in August.

International Monetary Fund chief Christine Lagarde warned of the risks of Congress failing to raise the $14.3 trillion debt ceiling, which would mean the U.S. government runs out of money to pay all of its bills after August 2.

"One of the consequences could be a decline of the dollar as a reserve currency and a dent in people's confidence in the dollar," Lagarde told PBS NewsHour in an interview.

U.S. financial executives added their voices to calls from the business community for Congress to strike a deal that would banish the specter of default. (reuters)

Reuter reports, the Great Recession" was even greater than previously thought, and theUS economy has skated uncomfortably close to a new one this year.

New data on Friday showed the 2007-2009US recession was much more severe than prior measures had found, with economic output declining a cumulative of 5.1 per cent instead of 4.1 per cent.

The report also showed the current slowdown began earlier and has been deeper than previously thought, with growth in the first quarter advancing at only a 0.4 per cent annual pace.

The data indicated the economy began slowing in the fourth quarter of last year before high gasoline prices and supply chain disruptions from Japan's earthquake had hit, suggesting the weakness is more fundamental and less temporary than economists had believed.

The annual revisions ofUS GDP data from the Commerce Department showed economic growth contracted at an annual average rate of 0.3 per cent between 2007 and 2010. Output over that stretch had previously been estimated to have been flat.

At the depth of the recession in the fourth quarter of 2008, output plummeted at an annual rate of 8.9 per cent -- the steepest quarterly decline since 1958, and 2.1 per centage points more than previously reported.

For a table, see see [ID:nCLATIE70O] The recession was already the deepest since the Great Depression and, while it still pales in comparison, the data help explain why it is taking so long to shake off its legacy.

"The general picture of the recession remains pretty much the same, it was a record decline before and now it is a even bigger decline,"Steven Landefeld, the director of the department'sBureau of Economic Analysis, told reporters.

The US President Barack Obama's administration and Republicans have so far failed to thrash out a deal to raise the debt ceiling as August 2 deadline approaches.

Meanwhile, market analysts predict that America will lose its top credit rating even if a deal is reached.

Press TV talks with Jeff Steinberg, senior editor for Executive Intelligence Review (EIR) magazine from Washington, about why America and its economy are on the verge of collapse and whether there is any solution to the crisis.

What follows is the text of the interview (which is also supported by (Michael Burns and Mike Stathis).

Press TV: Jeff Steinberg, let's look at what lawmakers are debating, basically spending cuts, and expenses, and of course at top of the list is the highest expense, that is the US military, which got over USD 600 trillion plus basis, maintaining that, spending over trillion dollars for war. Why not decrease the war spending?

Steinberg: Well, of course that is a very good point. Look, the Bush Administration took us to war, in Iraq and, as the other guest said, it was based on a complete lie.

For the first time in the history of the US, we went to war and simultaneously gave a significant tax cut to the wealthiest 10 present or more of the population. You can't do that without creating national bankruptcy.

We also deregulated the financial system, and imposed a completely illegal and unconstitutional taxpayers' guarantee on Wall Street's biggest gambling binge in history which is what blew up in 2007, 2008 and still continues to plague us.

The good news, I would add, is that in addition to a serious push for withdrawal of American forces from both Iraq and Afghanistan and a drawdown of our bloated military budget, there is also a bi-partisan legislation in the House of Representatives to reinstate Glass-Steagall, which was the 1933 law that broke up the too big to fail banks of the depression era and reestablish these walls of separation between commercial banking, depository banking and lending from the speculation of the brokerages and insurance companies and now of course add to that the hedge funds and all of these ridiculously leveraged debts.

Give that debt back to those Wall Street gamblers and you are already a significant step towards beginning to bring this problem under control where you can start to reinvest in job creation, infrastructure, improvement and reconstituting a physical economy that generates wealth rather than just debt.

There are 33 cosponsors on HR 1489 and I expect that very shortly we are going to see a majority of members of the House supporting this bill and an identical bill coming into the US Senate probably within days.

So there are solutions that are historically in line with the American constitution and with those occasions where we abused sensible economic policies rather than being victims of greedy speculators.

Press TV: An then you have things that are being thrown into the Senate of which they say the US to go at war any time, something that US President Barak Obama wants for it to get approved.

You have the full spectra of dominance doctrine, in terms of military equipment, in which the US wants to be superior in land, air, and sea where they have intercontinental ballistic submarines billions of dollars each that they cost and several hundred million dollars to maintain.

What about these types of notions and expenses?

Steinberg: Well, there is a pushback against that. In fact, there is an article in the current issue ofTime Magazine by ... Richard Haass, who is actually the president of the council on foreign relations, and while he is not calling for a new isolationism, he is calling for a re-calibrating of US policy where money is invested domestically, on job creation and on restoring our infrastructure, and those kinds of things, at the expense of this enormous expenditure on maintaining the US position as the world's leading military power and also of course as the world's leading military spender.

So I think that there is a dramatic mood shift that even a handful of people in the establishment are getting the whiff of. But the mood in the American population is that anybody who is not prepared to take radical measures to restore this balance and put the general welfare of the American people ahead of the interest of a bunch of Wall Street swindlers, their political career is going to be very short.

Press TV: As of 2007, the top 1 percent of households (the upper class) owned 34.6 percent of all privately held wealth.

Jeff Steinberg, who rules America, when only 15 percent of the wealth is going to the bottom 80 percent the average wage and salary worker?

Looking at the corporate taxes that are paid, when you compare it to what the average American is paying, why is it that the corporations are paying lowest which is 9 percent as compared to the average American?

And also combine that with the distribution wealth of which you have about 36 to 40 percent of the wealth of the United States being controlled by the wealthy which is only 1 percent of the population.

Steinberg: Look, we have had a binge of deregulation that goes back really to the late 70s, early 1980s, and as the result we have basically shadowed off our ability to direct credit into the real economy and along the way we have also absolutely failed to prosecute some of the most egregious cases of white color criminality probably in the history of the world.

There are three reports. You were referencing the Federal Reserve just a moment ago. Last week, the GAOK met with an audit of the Fed. It was something that was attached as an amendment to the Dodd-Frank Bill by senator Burnie Sanders and it not only revealed that 16 trillion dollars in emergency loans went out to Wall Street when in fact there was no justification for that if we had gone back to a Glass-Steagall standard, there would have been no need for a taxpayer's bailout because we would have protected commercial banks that are vital to the real economy and let the gamblers suffer their gambling losses.

We didn't do that, instead we said, as the other guest indicated, the sky is falling, we have got to act, we have got to basically bail out these criminals. You have in the Sanders Commission GAO report evidence that officials of the New York Federal Reserve, who are private citizens, were given waivers to continue the whole stock options in companies that they were directly bailing out.

This was criminal and it should have been prosecuted as criminal. You had the angelities [] report, the Financial Crisis Inquiry Commission study that came out in February and then a bipartisan study that came out of the Senate cosigned by Senator Carl Levin and Tom Colbert.

All of this laid out a pattern of clear criminality where government regulators and federal prosecutors simply let people get away with white color crime and as the result; American taxpayers have trillions of dollars in debt that is completely illegal.

In the 1930s, the Senate had the Pecora Commission. Leading Wall Street bankers were frog-marched to Sing Sing prison because of tax evasion and crimes that were on a scale far below the crimes committed by the top Wall Street people today.

But because they pour billions of dollars into lobbying and contributions to political campaigns, they are getting away literally with murder and we have reached the break point where the American people are not going to tolerate it anymore but we are also at the verge of a complete economic breakdown crisis, unless this policy is reversed. 
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uly 29, 2011 7:14 pm

Congress fights on edge of a cliff

With the deadline of August 2 all but upon it, the US Congress has yet to present a fiscal plan for President Barack Obama's signature. In deploring this lamentable state of affairs, one wonders where to begin. The distance in the debt-ceiling talks between the Republicans and the Democrats narrowed this week to almost nothing, yet still Congress edges to the brink of financial chaos. The ratio of peril to substance at stake has risen off the charts.

Until recently, many Washington observers have seen this fight as mere pantomime: pay no attention, the debt ceiling will be raised in the end. That might still be right – but when even cynics turn pale, one starts to worry. This thing, they are beginning to think, could actually happen.



The sticking point, now as throughout, has been the intransigence of Tea Party Republicans in the House of Representatives. This energised, populist-conservative faction combines a zealous, uncompromising desire to roll back government with a blithe disregard for the consequences of default. The desire is legitimate, the recklessness unforgivable.

The reluctance to budge springs partly from mistrust of the administration. Many Tea Party activists see the deadline as a feint. Exactly what happens on August 3 if there is no deal is hard to say – it is an experiment that is best avoided. But some, such as Tea Party champion and GOP presidential candidate Michele Bachmann, are opposed to raising the debt ceiling regardless. This crosses the line between fiscal recklessness and something close to madness.

Had this intransigence itself been a feint, John Boehner, leader of the House Republicans, could have declared victory already. The Tea Party's refusal to budge has dragged Democrats nearly all the way to Mr Boehner's position. When Senate Democrats insist that their latest proposal for raising the debt ceiling is reasonable, whereas Mr Boehner's plan is outrageous, they protest too much – and for most Democrats the imposture is shamefully obvious.

Senate leader Harry Reid's plan, like Mr Boehner's, calls for a down payment of spending cuts phased over 10 years, followed by a second instalment after further congressional action. The spending figures, put on a comparable basis, are not that different. The numbers for extra taxes, hitherto the main bone of contention, are not that different either: zero, in both cases. But whereas the House plan raises the debt ceiling twice – with the second stage coming in time to plague Mr Obama during next year's re-election campaign – the Senate plan raises it all in one go.

Mr Reid's plan offers the GOP victory: it rewards the Tea Party's hostage-taking, and Democrats are dismayed at the prospect. Yet what stalled the talks this week was the Tea Party's implacable refusal even to go along with Mr Boehner's plan. You see why the cynics blenched.

To resolve the issue, Mr Boehner must find Tea Party supporters who have not entirely taken leave of their senses: refuseniks willing to back not just his plan but also the agreement that must be struck with the Democratic majority in the Senate. Either that, or Mr Boehner must make an alliance with House Democrats.

If the House can start making semi-rational calculations, the terms of a possible House-Senate bargain are known. There would be two debt-ceiling increases, with the second structured as suggested earlier by Senate Republican leader Mitch McConnell, so that it would happen at the president's direction, with the House confined to merely symbolic opposition.

This would hardly be elegant, or all that democratic either. One of the most dismal aspects of this fiasco has been the removal of the country's fiscal discussions to closed-door sessions, leaving voters in ignorance about the necessary budget trade-offs and increasingly alienated from their politicians (were that possible). The sidelining of the president in recent days has aggravated this problem.

Be that as it may, the priority now is to raise the ceiling and avoid default. Later, when tempers have cooled, both parties should agree there will be no repetition. Whatever tactical benefits either might hope for, the risk to the country is vastly too large.

Longer-term fiscal reform should bury this nonsensical debt-ceiling process once and for all. Restoring America's fiscal reputation will require no less. Argue about taxes and argue about spending, but do not argue about whether to default on your debts or pay your bills. That is something no self-respecting nation should do – or, for that matter, need to be told.

Copyright The Financial Times Limited 2011. You may share using our article tools.

Key US debt votes for House and Senate


A Republican bill to raise the US debt ceiling, cut spending and avert default on US debt is set for back-to-back votes in the House and Senate.

House Speaker John Boehner's bill faces a conservative revolt, unanimous opposition by Senate Democrats and the threat of a veto by President Obama. Ahead of the votes, Republicans challenged Democrats to back the bill or take political blame for default.

Congress must raise the US debt limit by a deadline of Tuesday 2nd August.

Andrew North reports from Washington.

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    US President Barack Obama has said Democrats and Republicans must compromise to cut the US budget deficit and raise the debt limit.

    He warned time had almost run out, as Republican leaders scrambled to save their deficit-cutting bill amid a House of Representatives conservative revolt.

    The Democrats meanwhile announced they would put their plan to the Senate.

    The fiscal fiasco leaves the US inching closer to a potentially catastrophic default on federal debt next Tuesday.

    The US government will start running out of money to pay all its bills unless a $14.3tn (£8.79tn) borrowing limit is increased by 2 August.

    'Last train leaving'

    At the White House, Mr Obama accused House Republicans of pursuing a partisan bill that would force Washington into another debt limit fight within months.

    "Start Quote

    It's odds on the president won't have to veto the Republican plan, as the Tea Party seems to have done the job for him"

    He said: "There are plenty of ways out of this mess, but we are almost out of time."

    "The time for putting party first is over," he added. "The time for compromise on behalf of the American people is now."

    In Congress, the arm-twisting continued on Friday.

    House Speaker John Boehner and his lieutenants were working to whip Republicans into line behind their plan to cut the budget while raising the debt limit.

    A vote on that bill was called off on Thursday night when it became clear Mr Boehner lacked support within his own party.

    Senior Senate Democrats said the upper chamber would vote on a proposal at the weekend, and invited Republican Leader Mitch McConnell for compromise talks.

    "Too much is at stake to waste even one more minute - the last train is leaving the station," Senate Democratic Majority Leader Harry Reid said.

    But Mr McConnell accused Democrats of wasting precious time and obstructing a deal by vowing to block Mr Boehner's bill, should it be passed in the House.

    "Republicans have been doing the hard work of governing this week," he said.

    Mr Boehner convened a closed meeting of all 240 House Republicans on Friday morning to outline tweaks he has made overnight to the legislation.

    Mr Boehner and other Republican leaders spent all day Thursday arm-twisting dissident lawmakers, but they were unable to win over enough conservative hardliners.

    Some Republicans - including Tea Party supporters who won House seats last year and oppose raising the debt limit under any circumstance - feel the Boehner bill would not cut enough from the US budget.

    Mr Boehner's plan faces certain rejection by the Democratic-controlled Senate, as well as a White House veto threat, but could form the basis of an eventual compromise.


    It would reduce spending by about $900bn and raise the debt limit by nearly the same amount.

    US House Speaker John Boehner talks to the press on Capitol Hill on 25 July 2011Speaker John Boehner's plan cannot pass the Democratic-controlled Senate

    The Reid plan - which Mr Obama supports - would cut $2.2tn from deficits, and raise the debt ceiling by $2.7tn.

    Analysts say that if Republicans cannot pass a bill, the Senate could pass legislation first, which would increase the president's leverage.

    One possible scenario is that Mr Obama and Senate Democrats could shape a bill to their liking, then dare divided House Republicans to plunge the nation into default by rejecting it.

    The Boehner and Reid plans overlap in key ways, such as trimming spending over 10 years and shunning President Obama's call for tax increases on the wealthy and corporations.

    But Mr Boehner's approach would force another debt-limit showdown during next year's presidential campaign, something Mr Obama has fiercely opposed.

    Mr Reid's plan would see the ceiling lifted until after the November 2012 elections.

    Analysts predict a last-minute scramble for a compromise and razor-edge votes in both chambers, with the high-stakes game of legislative brinkmanship expected to continue all weekend.

    Washington hit its debt ceiling in May, but has used accounting adjustments, as well as higher-than-expected tax receipts, to continue operating.

    In recent decades, the US Congress has increased the government's borrowing authority dozens of times as a matter of routine.

    But this year newly elected conservative Republicans have demanded steep cuts to the budget deficit as the price of an increase.


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US economy slowed sharply in first half of year: US Commerce Department

WASHINGTON: The U.S. economy expanded at meager 1.3 percent annual rate in the spring after scarcely growing at all in the first three months of the year, the Commerce Department said Friday.

The combined growth for the first six months of the year was the weakest since the recession ended two years ago. The government revised the January-March figures to show just 0.4 percent growth _ down sharply from its previous estimate of 1.9 percent.

High gas prices and scant income gains have forced Americans to pull back sharply on spending in the spring. Consumer spending only increased 0.1 percent this spring, the smallest gain in two years. Government spending fell for the third straight quarter.

Stocks dropped in morning trading. The Dow Jones industrial average fell 100 points, and broader indexes also declined.

"These numbers are extremely bad," saidNigel Gault, an economist atIHS Global Insight. "The momentum in the economy is clearly very weak."

The sharp slowdown means the economy will likely grow this year at a weaker pace than last year. Economists don't expect growth to pick up enough in the second half of the year to lower the unemployment rate, which rose to 9.2 percent last month.

The weaker data will also add pressure to already-tense negotiations between President Barack Obama and lawmakers over increasing the debt limit. Any deal will likely include deep cuts in government spending. That could slow growth further in the short term.

But if Congress fails to raise the debt limit and the government defaults, financial markets could fall and interest rates could rise.

"It is hard to see the economy getting much stronger," Paul Dales, an economist at Capital Economics, said in a research note. "In fact, if the debt ceiling is not raised ... we could well have another recession on our hands."

Earlier this year, economists thought that a Social Security payroll tax cut would accelerate growth in 2011. But most of that money has gone to pay for higher gas prices.

Consumer spending on long-lasting manufactured goods, such as cars and appliances, fell 4.4 percent. Many auto dealers reported shortages of popular models after Japan's March 11 earthquake, cutting into auto sales.

Employers have pulled back on hiring after seeing less spending by consumers. The economy added just 18,000 net jobs in June, the fewest in nine months and a steep drop from the average of 215,000 jobs per month added from February through April.

Those who have jobs are seeing little gain in their incomes. After-tax incomes, adjusted for inflation, rose only 0.7 percent, matching the previous quarter and the weakest since the recession ended.

The drop in government spending was driven by cuts at the state and local level. Those governments have slashed spending in seven of the eight quarters since the official end of the recession.

Business investment, which has been a driver of growth during the recovery, also faltered this spring. Spending on equipment and software grew 5.7 percent in the second quarter, down from the first quarter's 8.7 percent pace and below the double-digit gains posted last year.

The government also revised data going back to 2003. The data show the recession was even worse than previously thought. The economy shrank 5.1 percent during the recession, which lasted from December 2007 through June 2009, compared to the earlier estimate of 4.1 percent. Both figures represent the worst downturn since World War II.

"The depth of the recession is now clearly so much deeper," Gault said.

Friday's report is the first of three estimates the government releases of the gross domestic product, which measures everything from restaurant meals to auto production to government spending.
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Boehner Sways Holdouts with Balanced Budget Amendment

ELSPETH REEVE2:34 PM ET45 ViewsComment

House Speaker John Boehner will likely pass his plan to raise the debt ceiling--shelved Thursday night because he couldn't get the votes--by adding a provision that would require a balanced-budget amendment to the Constitution to pass both chambers of Congress and be sent to the states for ratification before the limit is raised a second time. Fifty-three senators had already promised to vote down Boehner's plan before the amendment was added, so, as Teagan Goddard writes, "ironically, it seems the only way to pass the bill in the House is to make it more unacceptable to the Senate." And yet the tweaked version of Boehner's bill is still not tough enough for some House conservatives, because the amendment wouldn't require a two-thirds majority in Congress to raise taxes.

The Hill reports that the new plan would raise the debt limit in two increments through the 2012 elections. The second increase, which would need to happen early next year, can only occur after the House and Senate pass a balanced-budget amendment--either the one offered in the "cut, cap, and balance" plan, or one that passed in the 1990s.
But that plan is still too wimpy for some. Rep. Tom McClintock told Politico he doubted he'd vote yes. Rep. Joe Walsh isn't convinced either, Slate's Dave Weigel reports. "If you save it for the second tranche, I'm not sure that it's enforceable," Walse said, explaining why he was still voting against Boehner's bill. "We should do it now." (On the other hand, Rep. Louie Gohmert, on the other hand, who said he was a "bloodied and beaten no" Thursday, is now leaning yes, NBC News reports.) Weigel says the addition of the balanced-budget amendment is a PR victory for conservatives, because:
If it works, Republicans can say what they wanted to say yesterday: "We've passed two bills, and the Senate hasn't passed anything." But they'd be in a weaker position than they were yesterday, because they've proven that they can't pass a bill without a BBA hostage situation. How would markets react to the threat of an early 2012 debt limit vote that requires a supermajority for passage? We'll never find out. All we found out this morning is that Boehner is as weak as Democrats said he was in his relationship with conservatives.
Meanwhile, Harry Reid is moving forward with his own debt ceiling plan, still adamant that Boehner's bill has no chance in the Senate. But it looks like that's not what matters to Boehner right now: ABC News'Jonathan Karl tweeted Friday afternoon, "@SpeakerBoehner just stopped by a pizza lunch w/ Senate Republicans (in the Strom Thurmond room, of course). Got a standing ovation."

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Debt ceiling debate shows GOP at war with itself

Alex Wong/GETTY IMAGES - WASHINGTON - JULY 28: U.S. Speaker of the House Rep. John Boehner (R-OH) (2nd L) leaves the office of House Majority Whip Rep. Kevin McCarthy (R-CA) after a visit July 28, 2011 at the Capitol in Washington, DC. (Photo by Alex Wong/Getty Images)

There was always a mismatch between the tea party personality of the new Republican majority in the House and the politician that majority chose to lead them, House Speaker John A. Boehner (R-Ohio). After Thursday night's dramatic implosion, the country better understands the consequences.

The stunning events that played out Thursday night, as Boehner was forced to pull from the floor and rework the debt ceiling legislation he had put up for a vote, was both a failure of leadership and a failure by those who wouldn't follow. But it was perhaps inevitable.



Four possible options the Senate could take if it tables the House debt-reduction proposal.
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Four possible options the Senate could take if it tables the House debt-reduction proposal.

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Republicans asked the voters last year to give them the power to help govern the country. Thanks to dissatisfaction with the policies of President Obama and the dismal state of the economy, voters complied.

With that authority awarded through the ballot box came an obligation to recognize both the power they were given and the limits it entailed. Instead, House Republicans have spent the past two weeks debating debt-ceiling proposals that have no possibility of becoming law at this time. What they discovered Thursday night is that they were divided enough internally to scuttle passage of a plan that Boehner had put his prestige behind.

Boehner and other GOP leaders will spend Friday trying to pick up the pieces of Thursday's debacle. How much damage that legislative meltdown has done to resolving what has fast become a real crisis isn't yet known. But the damage to Boehner's credibility as speaker and to the Republican Party more generally could well linger well beyond the outcome of this episode.

Republicans have now steered themselves into a position that could make an ultimate resolution of the debt-ceiling standoff that much more difficult. The changes Boehner has been forced to make to his proposal probably will make it even more difficult for his rebellious colleagues to accept any compromise that comes over from the Senate.

If there is to be a compromise — and the outlines of a plausible agreement were under active discussion on Capitol Hill before the House bill was pulled — it is likely to be one that badly splits the Republicans in the House. Can Boehner afford that, after what happened to him Thursday?

When he broke off negotiations with the White House, Boehner took upon himself the responsibility to find a solution to the debt-ceiling deadlock. He turned the president largely into an observer this week, save for a prime-time speech on Monday and another statement delivered on Friday morning. In so doing, Boehner heightened the pressure on himself to deliver.

When he pulled out of negotiations with the White House a week ago, Boehner accused the president of not being willing to take yes for an answer in their negotiations. What is ironic, or worrisome, is that he has not been able to persuade his troops that, with the collapse of the grand bargain, they had won the argument — certainly for now at least.

Neither Boehner's plan for a two-step process to raise the debt ceiling nor the single-step process advanced by Senate Majority Leader Harry Reid (D-Nev.) calls for taxes. The grand bargain so prized by the president and, seemingly for a time by the speaker, seems long gone. But for the tea party faction in the House, that hasn't been enough. Their suspicions of Washington run that deep.

The debt ceiling fiasco: It's not about compromise; it's about principle

uly 27, 2011 8:25 PM EDT
(NaturalNews) An armed man approaches an innocent old lady on the street, shoves his gun in her face and screams, "Give me everything you own!" The little old lady, flummoxed but determined, angrily answers back, "Screw you! I'm not giving you one red cent!" The mugger pauses for a moment and then retorts, "Well then let's compromise. Just give me all the money you're carrying right now and we'll call it even!"

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This is the nature of the Democrats' "compromise" over the looming debt ceiling. Over the last three days, we've heard that word belligerently repeated over and over: "Compromise! Compromise! Compromise!" And yet all their compromise will really deliver to us is a compromised future where spending remains completely out of control and our children inherit total financial bankruptcy.
Some compromise, huh?
Maybe we don't need a compromise. Maybe what we need is to stand firm on principle. In this case, I'm talking about the principle of living within your means. Taking responsibility for your spending. Honoring the taxpayers by not eroding the value of their own dollars with incessant Federal Reserve "quantitative easing" (just a code phrase for counterfeiting money and dumping it into circulation).

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Standing firm on principle takes more courage than compromise

Compromise is not always the answer. If a heroin addict is at a recovery center and says to the doctor there, "I want 10 hits of heroin today" and the doctor says, "You'll get zero," then it's certainly not a good idea to "compromise" with the addict by giving him five hits of heroin. When an addiction is out of control, compromise is destructive, not constructive. And America's debt spending is, much like a heroin junky, an out-of-control addiction. We're addicted to debt, and too many people in Washington (both Democrats and Republicans, by the way) don't really want to quit that addiction. They just want more hits, which is the whole purpose of raising the debt ceiling.
Increased spending results in increased power, you see. The more money the government pays out to the citizens in "benefits," the more control it has over their lives. And the more money the government spends on military spending or other projects, the more easily members of Congress can funnel taxpayer dollars into the pockets of their evil corporate campaign supporters.
No government ever wants to get smaller. It always wants to grow and expand, consuming all the resources around it like a runaway cancer tumor. It is the very nature of power to seek expansion of its own power.
What America needs right now is radical cancer surgery to remove the tumor. That tumor is made up of power-hungry bureaucrats, lawmakers, and federal officials who all want to expand their power, collect more money and leave less on the table for the taxpayers who are footing the entire bill. And right now as we watch Boehner, Obama and Reid argue over the debt ceiling, we are really watching three cancer tumor cells argue over how to divvy up the rest of the healthy tissue they've already infected. To expect Big Government to solve the problems caused by Big Government is to expect cancer tumors to magically and spontaneously create their own cancer cures. It's just not gonna happen, folks. Even full-blown chemotherapy couldn't bring down this runaway debt spending monstrosity...

The cure for cancerous government growth

The cure for Big Government can only be found in the People, not in government itself. This is why America was founded on the idea that when government becomes too oppressive, too powerful or too arrogant, it is the right and the duty of the People to seize control and bring that government back down to a reasonable size -- all while reminding the government to "fear the People" (and serve the People) rather than trying to enslave the People.
That's where this is all headed: A massive social revolt against Big Government's ineptitude, arrogance and cancer-like tendencies. Because even if a new debt ceiling is reached by August 2nd (and it probably will be), that doesn't change the fact that the problem of runaway debt spending still looms over us... nor the fact that the Federal Reserve is gutting our economy, looting our nation and stealing our purchasing power away from us while stuffing the pockets of rich banksters with trillions of dollars in money that actually should belong to the American people.
We have been robbed blind, my friends. We have mugged at gunpoint, essentially, by the Fed, Big Government and the incompetent fools (criminals?) in Washington who claim to be working on your behalf while laughing their way down the halls of the Capitol building. They are crooks who make the crimes of Richard Nixon pale in comparison.

Real change may still be possible

There's only one member of Congress today who has the vision, the integrity, and the understanding of economics and the money supply to steer us away from the massive financial catastrophe that lays ahead, and his name is Ron Paul. Only Ron Paul gives us even a chance of making it through this financial challenge without a total collapse, and even Paul himself will admit it may already be too late regardless of who is in the White House.
Support Ron Paul at -- or get ready for a total financial blowout that will leave most Americans penniless and rioting in the streets.
It's coming, folks. The incompetence in Washington has potentially reached a point of no return. The thieving Federal Reserve criminals and Wall Street banksters have stolen your wealth without you even knowing it. The end of the dollar approaches. The end of America as we know it won't be far behind. Today we stand on the verge of financial doom, and all the Democrats can demand is that we "compromise" yet again.
It's time to end the compromises. It's time to stand for principle -- to stand up against runaway debt spending, against the criminal money creation of the Fed, and against the crooks and cowards who claim to be "leading" America today. I say it's time for a real leader who stands firm on principle -- a man like Rep. Ron Paul. I personally endorse Ron Paul as the only Presidential candidate who stands on principle. He is perhaps the last true leader left in Washington, and he needs your support.
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President Obama Is A Mercenary For Private, International Banksters And The Treasonous Oligarchy

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By Saman Mohammadi (about the author)
President Obama Is A Mercenary For Private, International Banksters And The Treasonous Oligarchy.
President Obama, like President Bush, President Clinton, and Poppy Bush, is a political mercenary for private, international banks and the treasonous oligarchy that owns the Federal Reserve Bank.

Read Washington's Blog post on July 26, called,Federal Reserve Admits: Fed Banks Are "Not Agencies" But "Independent Corporations" With "Private Boards of Directors," to read the quotes of a Federal Reserve lawyer saying in court that the Federal Reserve is independent from the United States government.

The Federal Reserve's interests are opposed to the interests of the American people and the American economy. What is good for the private owners of the Federal Reserve is bad for the average American family.

In effect, the global treasonous oligarchy is holding the American people and the American government hostage through their ownership and control of the Federal Reserve which illegally prints America's currency, a job delegated to the house of the people, the Congress, as stated in the U.S. Constitution.

Republican leaders John Boehner, Eric Cantor, Mitch McConnell and others are also shameless and traitorous mercenaries for the big private banks that are sucking America dry and using economic terrorism to reduce the standard of living in America to a third-world level.

The object is to make the American people poor and impoverished because it is easier to control a country with mostly poor people (through government handouts, economic pressure, etc) than a country with a strong middle class and productive small businesses.

Oligarchies throughout history destroy a nation's middle class once it gains the possession of the nation's economic and financial levers. The European-American oligarchy took control of America's economic might in 1913 when they persuaded President Woodrow Wilson through their agents to set up a private central bank to print America's money.

Disguising the private and unconstitutional nature of the central bank by calling it "Federal," was a great propaganda coup for the cunning oligarchy. At the time of the bank's creation, Congressman Charles August Lindbergh Sr. saw through the propaganda and called the passage of the Federal Reserve Act the "legislative crime of the ages." Lindbergh said:

"This [Federal Reserve Act] establishes the most gigantic trust on earth. When the President [Wilson} signs this bill, the invisible government of the monetary power will be legalized....the worst legislative crime of the ages is perpetrated by this banking and currency bill."

Nearly a century after the creation of the monstrous Federal Reserve Bank, America is on the verge of bankruptcy and economic implosion because of the Fed's corrupt and illegal economic policies.

II. To Save America and the West, Save The Middle Class

"There are three classes of citizens. The first are the rich, who are indolent and yet always crave more. The second are the poor, who have nothing, are full of envy, hate the rich, and are easily led by demagogues. Between the two extremes lie those who make the state secure and uphold the laws." - Euripides

Tyrannical rulers who attempt to bring a nation down to its knees go after the middle class, and divide the people based on racial and income differences. We are see this twofold strategy in America and the West, which has been conquered from within by a corrupt and sociopathic global banking, intellectual and corporate elite.

This crazy ruling elite is working behind the scenes to force the collapse of industrial civilization in the West to make way for a new, post-industrial, collectivized, global civilization, and a new global totalitarian government.

In order to save America, Canada, England and Western civilization as a whole we must save the middle class in our countries and establish national public banking systems.

The treasonous oligarchy that controls the White House, Congress, Senate and U.S. Supreme Court want a two-tiered society with them living like kings on top, and the people living like rats at the bottom.

Society in America and other Western countries is already on its way to this reality because a generation of people have bought the lies of "free trade," and "globalization lifts all boats." The reverse is the case. The treasonous oligarchy has profited, while the Western middle class has been the loser in the global race for resources and jobs.

In the event of a societal and economic breakdown billionaire CEOs will hire private security guards to protect their loot from hordes of angry and hungry people.

An unjust and corrupt society always leads to resentment, hatred, anarchy, violence, and ultimately, an endless war between the establishment and the people. This is preventable if rich, poor and middle class patriots across the West unite together to restore the rule of law, generate new jobs and economic competition, establish public banking, support sound money solutions, and hold criminal government officials along with their banking paymasters accountable for their crimes and lies.

It is clear by now to everyone that the big private banks that control America and the West are parasitic institutions that don't provide financial security, or contribute anything of value to society. They are simply used by the treasonous financial oligarchy to suck the life and blood out of the economy and the American people.

As Max Keiser said in April, the global banking system is run on drug money and supported by drug cartels. Keiser said, "When we say bankers are terrorists and they kill people, and they have the moral equivalency of a Mexican drug lord lopping the head off of a baby to support their crime syndicate, that's what we mean. They're the two faces of the same coin. They're terrorists. [Lloyd] Blankfein, [Jamie] Dimon, Jose whomever drug lord, they're all terrorists."

These giant financial institutions that have committed crimes and robbed the American people are not too big to fail. They can be destroyed, and they should be destroyed because they are holding the global economy hostage to try to force down the throats of the people criminal austerity measures.

Every single Federal Reserve Bank building in America should be brought down brick by brick by as many hands as possible. Also, the Fed's board of directors and Chairman should be charged with treason against the U.S. Constitution and the American people, along with the leaders of the Democratic and Republican parties, including President Obama, former President Bush, former President Clinton, and former President George H. W. Bush.
28 JUL, 2011, 08.36AM IST, AFP
US debt: How did superpower reach brink of default?

WASHINGTON: How did the United States, the world's richest nation and sole superpower, come to the brink of a catastrophic default on its debt that could send shockwaves through the fragile world economy?

Dire economic downturns -- including the worst since the Great Depression of the 1930s -- giant tax cuts, costly wars in Iraq and Afghanistan, and a pricey new health program for the elderly all helped sour Washington's fiscal picture.

Or, as PresidentBarack Obama put it literally in a speech late Monday to plead for a blend of deep cuts to government programs and increases to tax revenues: "For the last decade, we've spent more money than we took in."

Indeed, Washington posted a $236.2 billion federal budget surplus in the fiscal year ending October 1, 2000, and expected to post a $710 billion surplus a decade later, according to the non-partisanCongressional Budget Office.

"However, enactment of major legislation during the past decade, in combination with changing economic conditions, altered the long-term federal budget outlook dramatically," the CBO said in a March 2010 report.

The dramatic turnaround has left Obama predicting, in his budget released in February, a staggering $1.65 trillion deficit for the current fiscal year, a figure the CBO recently narrowed to about $1.3 trillion.

Obama's fellow Democrats like to point out that Washington was running a surplus when Democratic then-president Bill Clinton left office in January 2001, and swung to sky-high deficits under his Republican successor George W. Bush.

But Clinton benefited from deficit-slashing measures enacted by his predecessor, George H. W. Bush, including tax increases that alienated fellow Republicans and helped cost the Republican reelection, as well as a high-tech bubble that helped inflate government revenues.

The younger Bush came into office in January 2001, initially citing the surplus forecasts as a reason to enact historic tax cuts, which he muscled through Congress over strong Democratic objections.

But the high-tech bubble burst, the US economy went into a recession in March 2001, and the September 11, 2001 terrorist strikes traumatized the country, followed by tensions over the US invasion of Afghanistan.

Bush ordered US forces into Iraq to toppleSaddam Hussein in 2003, and with his Republican allies in theUS Congress beat back Democratic calls for tax increases or other measures to pay for both conflicts.

But plenty of Democrats ultimately voted to fund the wars on Bush's terms, like a young senator named Barack Obama, who backed some $300 billion in such spending between taking office in 2005 and his history-making 2008White House run.

And plenty of top Republicans now loudly embracing fiscal sobriety backed Bush's approach with little if any complaint, including House SpeakerJohn Boehner and Senate Minority LeaderMitch McConnell.

The United States spent roughly $1.283 trillion on the two wars to 2011, the non-partisan Congressional Research Service (CRS) said in a March 2011 report.

And the CRS said in a May 2011 that the overall cost of tax cuts passed in 2001, 2003, and 2004 cost Washington some $1.76 trillion in revenues to 2011.

A new government-backed prescription drug benefit for the elderly, approved in 2003 with bipartisan support, added another $552.2 billion over ten years, the CRS said, citing a CBO analysis.

By the time Bush's second four-year term ended in January 2009, he had piled $4.9 trillion more on top of the $5.7 trillion in debt he had inherited, and the US economy was in freefall, a victim of the 2008 global economic collapse.

"Wall Street got drunk," he explained memorably in July 2008. "It got drunk and now it's got a hangover."

Obama's proposed cure, an $800-billion-dollar stimulus plan passed in 2009 over Republican opposition, stemmed job losses but failed to keep unemployment below 8.0 percent, as the White House had promised.

The US national debt deepened, reaching its congressionally set $14.3 trillion on May 16 and forcing Washington to use spending and accounting adjustments, as well as higher-than-expected tax receipts, to continue operating normally, which it can only do through August 2.

At that point, US leaders will face an agonizing choice about cutting an estimated 40 cents of every dollar in spending and defaulting either on debt payments or on other obligations like government health or retirement benefits.

Finance and business leaders have warned that failure to raise theUS debt ceiling by then would send shockwaves through the fragile world economy, while Obama has predicted a default would trigger economic "Armageddon."

Republican leaders face restive members close to the archconservative Tea Party" movement who are dead set on draconian cuts, reject any tax revenue increases, and even doubt the debt ceiling needs to be raised -- making a compromise elusive.

US economy: GDP growth much weaker than thought

US economic growth chart

US economic growth is much weaker than first thought, government figures show.

The economy grew at an annualised rate of 1.3% in the second quarter, the Commerce Department said. Economists had forecast growth of 1.8%.

And in a surprise move, first-quarter growth was revised down sharply from 1.9% to 0.4%.

This evidence of economic weakness increases the pressure on the government as it attempts to increase its borrowing limit.

Slow growth makes it more difficult for the US to tackle its deficit.

If Congress does not raise the debt limit by 2 August, the US government could face funding shortfalls that it cannot meet by extra borrowing.

"Start Quote

Businesses can't hire until consumers start spending, but people won't spend unless they're sure they have jobs"

Carl RiccadonnaEconomist, Deutsche Bank

President Barack Obama urged Democrats and Republicans in the Senate "to find common ground" on a plan to address the debt crisis.

"There are plenty of ways out of this mess. But we are almost out of time.

"If we don't come to an agreement, we could lose our country's triple A credit rating," he said. "That is inexcusable."

"On a day when we've already been reminded how delicate the economy is, we can end [this crisis] ourselves."

US markets opened lower, with the Dow Jones, the S&P 500 and the Nasdaq all falling 1% in early trade.

European markets, which were already in negative territory, saw further falls after the figures were released.


After the revision, the US growth figures now correspond to a quarterly increase of just 0.1% in the first three months of 2011, followed by a 0.3% rise in the second quarter.

Economists had expected steady growth in the second quarter, now that supply constraints from Japan after the earthquake and tsunami are easing.

"Start Quote

The White House will see a silver lining in today's grim GDP figures, if they help to remind the negotiators on Capitol Hill of the fragility of the US recovery"

The main reason for the lower-than-expected second-quarter figure was that consumer spending virtually ground to a halt, growing by just 0.1%, compared with 2.1% growth in the first quarter.

The large downward revision to the first quarter's growth figure was made as a result of lower capital investment and higher imports than first thought, and adjusting how seasonal factors are taken into account.

In addition, growth for the fourth quarter of 2010 was revised down from 3.1% to 2.3%, indicating that the economy had already started slowing before the end of last year.

Tim Ghriskey, chief investment officer at Solaris Asset Management, said the figures were "shocking".

"Clearly this is evidence of a mid-cycle slowdown. The only question now is do we see a pick-up in the second half and so far the economic data to date doesn't suggest that.

"You might have some analysts come out and talk recession, talk about a double dip. Right now none of the forecasts even come close to that but this is weak data."

Worse recession

The Commerce Department's Bureau of Economic Analysis makes annual revisions to its GDP estimates every July, incorporating more complete and detailed data.

It now says that the US recession of 2007-2009 was more severe than previously reported, with the economy shrinking by 5.1% over that period, rather than 4.1%.

But it also says that growth in 2010 was a bit stronger than it had first estimated.

It now puts 2010 growth at 3%, up from the previous 2.9%.

More on This Story

US Economy

2011 U.S. debt ceiling crisis

From Wikipedia, the free encyclopedia

The 2011 United States debt ceiling crisis concerns the ongoing debate over whether the debt ceiling of the United States should be increased and, if so, the amount of the extension. Also under discussion are: what future spending policies and/or tax code policies should be associated with the action to increase the debt ceiling[citation needed] and what structural changes for future budgeting processes if any (for example, spending caps and/or a Balanced Budget amendment) should be associated with that action.[citation needed] The situation is regarded as a crisis due to the potential for a major worsening of the economic status of the U.S. in case of government default.[citation needed]

The debate is contentious due to the implications of not raising the debt ceiling, political ideologies[1][not in citation given], long-term debtconcerns,[citation needed] and competing plans to address these concerns.[2]




U.S. debt from 1940 to 2010. Red lines indicate the Debt Held by the Public (net public debt) and black lines indicate the Total Public Debt Outstanding (gross public debt), the difference being that the gross debt includes funds held by the government (e.g. the Social Security Trust Fund). The second panel shows the two debt figures as a percentage of U.S. GDP (dollar value of U.S. economic production for that year). Data from the President's proposed budget (Historical Tables) and other tables listed when you click on the figure. The top panel is deflated so every year is in 2010 dollars.

[edit]Current situation

Federal law currently sets the debt ceiling at $14.3 trillion.[3] According to the Treasury, the debt ceiling was reached on May 16, at which time the Treasury began extraordinary measures to temporarily finance the government (see Debt issuance suspension period and alternate methods of funding). The Treasury estimated that these measures would enable government payments to continue until August 2, 2011, after which Treasury would not be able to fulfill all US obligations.[4]

As of May 2011, approximately 40 percent of US government spending relied on borrowed money.[5] Raising the debt ceiling would allow the Federal Government to continue to borrow money to support current spending levels. If the debt ceiling is not raised, the Federal Government would have to cut spending immediately by 40 percent, affecting many daily operations of the government.[5] The Treasury would determine what items would be paid.[6] If the interest payments on the national debt are not made, the United States would be indefault, potentially causing catastrophic economic consequences for the US and the wider world as well. (Effects outside the US are anticipated because the United States has a very high gross domestic product with the world's largest single national economy; because the US is a major trading partner to many countries, including other major world powers who hold its debt and could demand repayment; and because spending and investment power enable the US to act as a mediator and economic model.)

According to the US Treasury, "failing to increase the debt limit would... cause the government to default on its legal obligations – an unprecedented event in American history".[7] These legal obligations include paying Social Security and Medicare benefits, military salaries, interest on the debt and many other items. If the debt ceiling is not raised, then the Treasury will prioritize the items to pay with its ongoing revenue stream. Treasury could choose to pay interest so that the US does not default on its sovereign debt.[8]

[edit]What is the debt ceiling?

If the Treasury does not collect enough in revenue to pay for expenditures by the Federal Government, it may be authorized by Congress to issue debt (in other words, borrow money) to pay for the federal budget deficit. Prior to 1917, the Congress had to authorize each round of borrowing directly. In 1917, in order to provide more flexibility to finance the United States' involvement in World War I, the Congress instituted the concept of "debt ceiling". Since then, the Treasury can only borrow money as long as the total debt (excepting some small special classes) does not exceed a ceiling stated by law.[citation needed] To change the debt ceiling, Congress must enact specific legislation and the President must sign it into law.

The process of setting the debt ceiling is separate and distinct from the regular process of financing government operations, and raising the debt ceiling neither directly increases nor decreases the budget deficit. The US government passes a federal budget every year. This budget details projected tax collections and outlays and, therefore, the amount of borrowing the government would have to do in that fiscal year. A vote to increase the debt ceiling is, therefore, usually seen as a formality, needed to continue spending that has already been approved previously by the Congress and the President. The Government Accountability Office explains, "the debt limit does not control or limit the ability of the federal government to run deficits or incur obligations. Rather, it is a limit on the ability to pay obligations already incurred."[9]The apparent redundancy of the debt ceiling has led to suggestions that it should be abolished altogether.[10][11]

The United States has had public debt since its inception. Debts incurred during the American Revolutionary War and under the Articles of Confederation led to the first yearly report on the amount of the debt ($75,463,476.52 on January 1, 1791). Every President since Harry Truman has added to the National Debt expressed in absolute dollars. The debt ceiling has been raised 74 times since March 1962,[12]including 18 times under Ronald Reagan, 8 times under Bill Clinton, 7 times under George W. Bush and 3 times to date under President Obama.

President Obama opposed one of those increases to the debt ceiling under George W. Bush and criticized Bush for a lack of leadership. "The fact that we are here today to debate raising America's debt limit is a sign of leadership failure. It is a sign that the US Government can't pay its own bills," Obama said before a March 16, 2006, vote on raising the debt limit. The Senate narrowly approved raising the limit along partisan lines, 52–48, with all Democrats opposed.[1] This apparent contradiction can be explained by the fact that Democrats and Republicans disagree on how the government spends money and what the money is spent on, not on the idea itself of raising the debt ceiling.

[edit]Impact of budget deficits and long-term debt on debt ceiling debate

The growing anxiety since 2009 over the large United States federal budget deficits and mounting debt led to the contentious debate over raising the debt ceiling:

  • According to the Congressional Budget Office (CBO): "At the end of 2008, that debt equaled 40 percent of the nation's annual economic output (a little above the 40-year average of 37 percent). Since then, the figure has shot upward: By the end of fiscal year 2011, the Congressional Budget Office (CBO) projects federal debt will reach roughly 70 percent of gross domestic product (GDP)—the highest percentage since shortly after World War II." The sharp rise in debt after 2008 stems largely from lower tax revenues and higher federal spending related to the severe recession and persistently high unemployment in 2008–11.[13][14]
  • In 2009, the Tea Party movement sprang out of Americans being concerned about the increased government spending.[15][16]
  • In early 2010, to address concerns of deficits and debt, President Obama established the Bowles-Simpson Commission to propose recommendations to balance the budget by 2015.[17] The commission issued their report in December 2010 but the recommendations were never adopted.
  • The Tea Party helped usher in a wave of new Republicans in the 2010 mid-term elections[18] whose major planks during the campaign included cutting Federal spending[19] and stopping any tax increases.[20] These new Republicans and the new Republican House majority greatly affected the political debate in 2011 on raising the debt ceiling.
  • In early- and mid-2011, Standard & Poor's and Moody's credit rating services issued warnings that United States could be downgraded because of the continued large deficits and increasing debt. [21][22][23]
  • According to CBO's 2011 Long-Term Budget Outlook, without major policy changes the large budget deficits and growing debt would continue, which "would reduce national saving, leading to higher interest rates, more borrowing from abroad, and less domestic investment—which in turn would lower income growth in the United States." [24]
  • Through 2010–2011, the European sovereign debt crisis was playing out, and there were concerns that the United States was on the same trajectory.[25]

[edit]Debt issuance suspension period and alternate methods of funding

When the debt ceiling is reached, the U.S. Treasury can declare a debt issuance suspension period, and utilize methods other than issuing new debt to acquire funds to meet federal obligations. Several of these methods are described in detail in an Appendix attached to Secretary Geithner's April 4, 2011 letter to Congress[26] These "extraordinary measures" include using some federal employee payroll deductions (those directed to the Civil Service Retirement and Disability Fund and to the federal employee Government Securities Investment Fund [G Fund], which is part of a 401(k)-like program known as the Thrift Savings Plan or TSP). These methods have been used in several previous episodes in which federal debt neared its statutory limit.[27]

These methods were implemented as of May 16, 2011 (as the current debt ceiling was exceeded) when, in a letter to Congress, Secretary Geithner declared a "debt issuance suspension period", which provides the Secretary authority to sell assets from the Civil Service Retirement and Disability trust fund and the G Fund of the TSP. According to this letter, this period could "last until August 2, 2011, when the Department of the Treasury projects that the borrowing authority of the United States will be exhausted".[28]

[edit]Implications of not raising the debt ceiling

On August 2, without a raise in the debt ceiling, the Treasury will reach the point at which it will, in addition to being unable to further borrow money to pay its bills, be unable to gather enough funds from alternative sources to pay for all of the federal government's obligations. While the government has enough income from tax revenues and other sources to pay some governmental obligations, it would have to choose which obligations to meet and which not to meet. Choosing which appropriations to pay for does not necessarily amount to defaulting on obligations to bondholders. As an example, satisfying existing interest payments to bondholders, Medicare payments, Social Security payments, unemployment insurance and defense contractors would leave no remaining funds to pay active duty military, federal workers, taxpayers due refunds and many other obligations generally considered essential. [29]

Failure to extend the limit may have serious repercussions. This would probably include causing panic in bond markets and damaging the economic recovery from the Great Recession.[9][30] Such a crisis could throw the United States back into a recession.

Former Treasury Secretary Lawrence Summers warned of serious consequences of a default in July 2011, including: (a) higher borrowing costs for the U.S. government (as much as 1% or $150 billion/year in additional interest costs); and (b) the equivalent of bank runs on the money and other financial markets, potentially as severe as those of September 2008.[31] Bank failures and a potential bank run, curbed bygovernment intervention, were a major catalyst of the Global Financial Crisis that caused the Great Recession.

In response to Jim DeMint and other Republican Senators, who suggested that the current level of the debt ceiling could be maintained by prioritizing payments on the debt above other government spending, Treasury Secretary Timothy Geithner wrote a letter of reply in late June. He said that this would require "cutting roughly 40 percent of all government payments", which could only be achieved by "selectively defaulting on obligations previously approved by Congress". He argues that this would harm the reputation of the United States so severely that there is "no guarantee that investors would continue to re-invest in new Treasury securities", forcing the government to repay the principal on existing debt as it matures, which it would be unable to do under any conceivable circumstances. He concluded: "There is no alternative to enactment of a timely increase in the debt limit."[32]

Even if the Treasury were to prioritize payments on the debt above other spending and avoid formal default on its bonds, failure to raise the debt ceiling would force the government to reduce its spending by as much as 10% of GDP overnight, leading to a corresponding fall inaggregate demand. Such a significant shock, if sustained, is thought to be able to reverse the recovery and send the country into a recession.[33][34]


According to the Treasury Department, the deadline to increase the debt ceiling is August 2, 2011, when the U.S. government would run out of cash to pay all its bills.[35] According to Barclays Capital the Treasury may run out of cash around August 10, when $8.5 billion in Social Security payments are due. According to Wall Street analysts, the U.S. Treasury can't borrow from the capital markets after August 2, but still has enough cash to meet its obligations until August 15. Analysts also predict that the U.S. Treasury will be able to roll over the $90 billion in U.S. debt that matures on August 4 and gain additional time to avert a crisis.[36] No one knows how the financial market and investors will react if U.S. Treasury is unable to borrow additional funds or meet its financial obligations.

[edit]Proposed resolutions

Congress is now considering whether and by how much to extend the debt ceiling (or eliminate it), and what long-term policy changes (if any) should be made concurrently.[37] The House of Representatives has refused to raise the debt ceiling without deficit reduction, voting down a 'clean' bill to increase the debt ceiling without conditions. The May 31 vote was 318 to 97, with all 236 Republicans and 82 Democrats voting to defeat the bill.[38] The Republicans largely believe a deficit reduction deal should be based solely on spending cuts, including cuts to entitlements, without any tax increases, to reduce or solve the long term issue of debt.[39] President Obama and the Democrats in the US Congress want an increase in the debt ceiling to solve the short-term borrowing problem, and in exchange support a decrease in the budget deficit to be funded by a combination of spending cuts and revenue increases.[40] Some prominent liberal economists, such as Paul KrugmanLarry Summers, and Brad DeLong, and prominent investors such as Bill Gross, go even further, and argue that not only the debt ceiling should be raised, but it should be accompanied by a short-term increase in federal spending (and, therefore, deficit), which would stimulate the economy, reduce unemployment, and ultimately reduce the deficit in medium to long term.[41][42]

Some Tea Party Caucus and other Republicans, however, (including, but not limited to, Senators Jim DeMintRand Paul, and Mike Lee, and Representatives Michele BachmannRon Paul, and Allen West, etc.) are skeptical about raising the debt ceiling altogether (with some suggesting the consequences of default are exaggerated), arguing that the debt ceiling should not be raised and "instead the federal debt be "capped" at the current limit,"[43] "although that would oblige the government to cut spending by almost half overnight."[44] For more, see"consequences of not raising the debt ceiling."

Jack Balkin, the Knight Professor of Constitutional Law and the First Amendment at Yale Law School, besides arguing that the President can invoke Section 4 of the 14th Amendment to solve the crisis (see next section), also suggests two other ways to solve the debt ceiling crisis: he points out that the U.S. Treasury has the power to issue platinum coins in any denomination, so it could solve the debt ceiling crisis by issuing two platinum coins in denominations of one trillion dollars each, depositing them into its account in the Federal Reserve, and writing checks on the proceeds. Another way to solve the debt ceiling crisis, Balkin suggests, would be for the Federal Government to sell the Federal Reserve an option to purchase government property for $2 trillion. The Fed would then credit the proceeds to the government's checking account. Once Congress lifts the debt ceiling, the president could buy back the option for a dollar, or the option could simply expire in 90 days. [45]

Among others, in a report issued by the credit rating agency Moody's, analyst Steven Hess suggested that the government should consider getting rid of the limit altogether, because the difficulty inherent in reaching an agreement to raise the debt ceiling "creates a high level of uncertainty" and an increased risk of default. As reported by The Washington Post, "without a limit dependent on congressional approval, the report said, the agency would worry less about the government's ability to meet its debt obligations."[46]

Additionally, some argue the debt limit is unconstitutional, and suggest that the President could simply declare the debt ceiling as such to resolve the crisis. For more, see the section entitled "constitutionality of the debt ceiling" below.

[edit]Constitutionality of the debt ceiling

During the debate, some scholars and Democratic lawmakers[47] suggested that the President could declare that the debt ceiling violates theUnited States Constitution and direct the Treasury to issue more debt.[48] They point to Section 4 of the Fourteenth Amendment to the United States Constitution, passed in the context of the Civil War Reconstruction, that states that the validity of the public debt shall not be questioned:

Section. 4. The validity of the public debt of the United States, authorized by law, including debts incurred for payment of pensions and bounties for services in suppressing insurrection or rebellion, shall not be questioned. But neither the United States nor any State shall assume or pay any debt or obligation incurred in aid of insurrection or rebellion against the United States, or any claim for the loss or emancipation of any slave; but all such debts, obligations and claims shall be held illegal and void.


  • Jack Balkin, looking into the Legislative History of the Fourteenth Amendment, argues that Section 4 was adopted precisely to guard against politically-determined default. Referencing the sponsor of the provision, Senator Benjamin Wade, Balkin argues that "the central rationale for Section Four... was to remove threats of default on federal debts from partisan struggle." Whereas the debt ceiling gives Congress the power for the United States to default on its debts by requiring approval of a higher debt limit; Balkin quotes Senator Wade: "every man who has property in the public funds will feel safer when he sees that the national debt is withdrawn from the power of a Congress to repudiate it and placed under the guardianship of the Constitution than he would feel if it were left at loose ends and subject to the varying majorities which may arise in Congress." Balkan claims that this reveals "an important structural principle. The threat of defaulting on government obligations is a powerful weapon, especially in a complex, interconnected world economy. Devoted partisans can use it to disrupt government, to roil ordinary politics, to undermine policies they do not like, even to seek political revenge. Section Four was placed in the Constitution to remove this weapon from ordinary politics."[49]
  • Bruce Bartlett, a libertarian former Reagan adviser and columnist for The Fiscal Times, argues that Section 4 renders the debt ceiling unconstitutional, and that the President should disregard the debt limit.[50]
  • In July 2011, The Nation editor Katrina vanden Heuvel argued that the President could use the public debt section of the Fourteenth Amendment to force the Treasury to continue paying its debts if an agreement to raise the debt ceiling is not reached.[51]
  • Laurence Tribe, professor of Constitutional Law at Harvard Law School, has called the argument that the public debt clause can nullify the debt ceiling "false hope" and has noted that nothing in the Constitution enabled the president to "usurp legislative power" with regards to the debt. Tribe also notes that since Congress has means other than borrowing to pay the federal debt (including raising taxes, coining money, and selling federal assets), the argument that the president could seize the power to borrow could be extended to give the President the ability to seize those powers as well.[52]
  • Garrett Epps argues that the President would not be usurping Congressional power by invoking Section 4 to declare the debt ceiling unconstitutional, because the debt ceiling exceeds Congressional authority: calling it legislative "double-counting," as paraphrased inThe New Republic, "because Congress already appropriated the funds in question, it is the executive branch's duty to enact those appropriations."[53] In other words, given Congress has appropriated money via federal programs, the Executive is obligated to enact and, therefore, fund them; the debt ceiling's limit on debt prevents the executive from carrying out those instructions given by Congress, on the constitutional authority to set appropriations, and is therefore unconstitutional. President Bill Clinton endorsed this line of argument, saying he would eliminate the debt ceiling using the 14th amendment, calling it "crazy" that Congress is allowed to first appropriate funds and then gets a second vote on whether to pay for them.[54]
  • Furthermore, Matthew Zeitlin argues that, were Section 4 invoked, members of Congress would not have standing to sue the President for allegedly usurping congressional authority, even if they were willing to do so; and those likely to have standing would be people "designed to elicit zero public sympathy: those who purchased credit default swaps which would pay off in the event of government default."[53]Relatedly, Matthew Steinglass argues that, because it would come down to the Supreme Court, the Court would not vote in the favor of anyone who could and would sue: it would rule the debt ceiling unconstitutional. This is because, for the Court to rule to uphold the debt ceiling, it would, in effect, be voting for the United States to default, with the consequences that would entail; and, Steinglass argues, the Court would not do that.[55]
  • Michael Stern, Senior Counsel to the U.S. House of Representatives from 1996 to 2004, stated that Garrett Epps "had adopted an overly broad interpretation of the Public Debt Clause and that this interpretation, even if accepted, could not justify invalidating the debt limit" because "the President's duty to safeguard the national debt no more enables him to assume Congress's power of the purse than it would enable him to assume the judicial power when (in his opinion) the Supreme Court acts in an unconstitutional manner."[56]
  • Rob Natelson, former Constitutional Law Professor at University of Montana, argues that "this is not some issue in the disputed boundaries between legislative and executive power." He continues "That's why the Constitution itself (Article I, Section 8, Clause 2) gives only Congress, not the President, the power "To borrow Money on the credit of the United States." In another agrument, Natelson states that Bruce Bartlett "deftly omits a crucial part of the quote from the Fourteenth Amendment. It actually says, 'The validity of the public debt of the United States, AUTHORIZED BY LAW . . . shall not be questioned.' In other words, Congress has to approve the debt for it not to be questioned. And note that this language refers to existing debt, not to creating new debt. He also neglects to mention that Section 5 of the Fourteenth Amendment specifically grants to Congress, not to the President, authority to enforce the amendment."[57]:
Section 5. The Congress shall have power to enforce, by appropriate legislation, the provisions of this article.

George Madison, General Counsel to the US Treasury, wrote on 8 July 2011 that "Secretary Geithner has never argued that the 14th Amendment to the U.S. Constitution allows the President to disregard the statutory debt limit" and that "the Constitution explicitly places the borrowing authority with Congress." He additionally affirmed that "Secretary Geithner has always viewed the debt limit as a binding legal constraint that can only be raised by Congress."[58]

President Obama himself later stated that he would not use this method to solve the crisis.[citation needed]


  • February 12, 2010. The most recent increase in the debt ceiling was signed into law by President Obama, after being passed by theDemocratic 111th Congress. It increased the debt ceiling by $1.9 trillion from $12.4 trillion to $14.3 trillion.[59]
  • February 18, 2010. President Obama issues an Executive Order to establish the National Commission on Fiscal Responsibility and Reform, also known as the Bowles-Simpson Commission. The mission of the Commission was to propose recommendations designed to balance the budget, excluding interest payments on the debt, by 2015. It was tasked to issue a report with a set of recommendations by December 1, 2010.[60]
  • November 2, 2010. United States midterm elections: Considered a major victory, the Republican Party gained 63 seats in the U.S. House of Representatives, recapturing the majority by 242–193 in the 112th Congress.[61] Major planks for the House Republicans during the election campaign were cutting Federal spending [62] and stopping any tax increases.[63]
  • December 1, 2010. The Bowles-Simpson Commission on Fiscal Responsibility and Reform issues its report but the recommendations fail to win support of at least 14 of the 18 members necessary to adopt it formally.[64][65] The recommendations were never adopted by Congress nor President Obama.
  • January 6, April 4 and May 2, 2011. Secretary of the Treasury Timothy Geithner sends three letters requesting an increase in the debt ceiling.[66][67][68]
  • January 28, 2011. Moody's Investors Service says it may place a "negative" outlook on the Aaa rating of U.S. debt sooner than anticipated as the country's budget deficit widens.[69]
  • February 14, 2011. President Obama releases his budget proposal for fiscal year 2012.[70] Republicans criticize the budget for doing too little to rein in the burgeoning U.S. deficit.[71] The CBO analysis released in April 2011 estimated that the budget would increase total deficits over 10 years by $2.7 trillion: from $6.7 Trillion of the March 2011 baseline to $9.4 Trillion with the proposed budget.[72] The Senate rejects the budget proposal on May 25, 2011 (see below).
  • April 14, 2011. Both the House of Representatives and the Senate voted in favor of the 2011 United States federal budget, 260–167 and 81–19 respectively. This budget projected the 2011 deficit to be $1.645 trillion, and therefore ensured that the debt ceiling would be hit during this fiscal year.
  • April 15, 2011. On a party-line vote 235–193, the House of Representatives passed the Republican 2012 budget proposal aimed to reduce total spending by $5.8 trillion and reduce total deficits by $4.4 trillion over 10 years compared to the current-policy baseline.[73] It included reform to Medicare and Medicaid entitlement programs which the Democrats criticized as an attempt to leave seniors and poor holding the bag on health care costs. The criticism resonated with the many in the public who voiced opposition to the proposed changes.[74] The Senate rejects the budget proposal on May 25, 2011 (see below).
  • April 18, 2011. Standard & Poor's Ratings Services revised its outlook on U.S. to negative due to recent and expected further deterioration in the U.S. fiscal profile, and of the ability and willingness of the U.S. to soon reverse this trend. With the negative outlook, S&P believes there is a likelihood of at least one-in-three of a downward rating adjustment within two years.[75]
  • May 16, 2011. The debt ceiling is reached. Secretary Geithner issues a debt issuance suspension period, directing the Treasury to utilize "extraordinary measures" to fund federal obligations.[76]
  • May 18, 2011. Bipartisan deficit-reduction talks among the "Gang of Six" high-profile Senators are suspended when Republican Tom Coburn drops out.[77]
  • May 24, 2011. Vice President Joe Biden and four Democratic lawmakers begin meeting with the Republican House Majority Leader Eric Cantor and the Republican Senate Minority Whip Jon Kyl, in an effort to continue the talks. Cantor says that these talks would lay the groundwork for further discussions between President Obama, Republican Speaker of the House John Boehner and other leaders of Congress.[78]
  • May 25, 2011. The Senate rejects both the Republican House budget proposal by a vote of 57–40 and the Obama budget proposal by a vote of 97–0.[79]
  • May 31, 2011. The House votes on a bill to raise the debt ceiling without any spending cuts tied to the increase. President Obama asked Congress to raise the debt ceiling in a 'clean' vote that included no other conditions. The bill, which would have raised the debt ceiling by $2.4 trillion, failed by a vote of 97–318. Democrats accused Republicans of playing politics by holding a vote they knew would fail.[80]
  • June 23, 2011. Biden's negotiations on the debt ceiling are cut off when both House Majority Leader Cantor and Senate Minority Whip Kylwalk out over disagreements over taxes.[81]
  • July 19, 2011. The Republican Majority in the House bring the Cut, Cap and Balance Act (H.R.2560),[82] their proposed solution to the crisis, to a vote. They pass the bill by a vote of 234–190, split closely along party lines: 229 Republicans and 5 Democrats 'for,' 181 Democrats and 9 Republicans 'against;' it is sent to the Senate for consideration. The Bill authorized that the debt ceiling be raised by $2.4 trillion AFTER a Balanced Budget Amendment was passed by Congress. Since Constitutional amendments require a two-thirds majority vote in both chambers of Congress to pass, a vote for a Balanced Budget Amendment would require more support than the Cut, Cap and Balance Act bill achieved in the House vote.[83]
  • July 22, 2011. The Senate votes along party lines to table the Cut, Cap and Balance Act; 51 Democrats voting to table it and 46 Republicans voting to bring it to debate. Senate Majority Leader Harry Reid called the Act "one of the worst pieces of legislation to ever be placed on the floor of the United States Senate." Even had it passed Congress, President Obama had promised to veto the bill.[84]
  • July 25, 2011. Republicans and Democrats outlined separate deficit-reduction proposals.[85]
  • July 25, 2011. President Obama and Speaker of the House Boehner addressed the nation separately over network television with regards to the debt ceiling.[86][87]
  • August 2, 2011. Date projected by the Department of the Treasury that the borrowing authority of the United States will be exhausted.[88]


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