Saturday, November 6, 2010

The Madmen Running Government

Republicans are planning to demand major spending cuts next year before they would agree to raise the amount of federal debt that can be issued, setting up a clash between the Obama administration and a Congress stocked with lawmakers who campaigned as deficit hawks.

The U.S. can't accrue debt above a certain ceiling set by lawmakers. In the most extreme scenario, the government would default on certain debts if the cap doesn't move.(1)

Even putting this scenario into the mainstream erodes the credibility of the U.S. government when it comes to paying back debt. Treasuries may have rock bottom yields now, but over the slightly longer term it just hastens the move away from a U.S. centered world.

1'GOP to Use Debt Cap to Push Spending Cuts'- WSJ

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