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The debt crisis of 2011

Washington is engulfed in the debt scare that is looming ahead on August 2, deadline. Federal laws requires a $14.3 trillion debt ceiling and Treasury Department has already breached that limit on May 16, 2011. Congress must increase the current $14.3 trillion debt ceiling by Aug. 2, otherwise, according to Treasury Secretary Timothy F. Geithner, the nation will begin to default on its outstanding debts, and unable to meet its obligations on military pay, medicare, and host of other unthinkable things.

US has to borrow more money to stay float, as simple as that. Congressional Republicans have made it clear that they will stand their ground, and only raise the debt limits if accompanied by spending cuts. The Democrats and President Obama just want to raise the debt ceiling period. This is a serious situation, something that has not come to this confrontation before.


Last week the Congress voted 318-97 against raising debt ceiling without any spending cuts. Democrats wanted raising taxes to pay for the debt but the Republicans leadership under Eric Cantor just took a long walk form the table, leaving the talks in shambles.

If no agreement is ever reached on Aug 2,2011,  what may happens? Its a downright scary thought for most Americans. Its has not happened before that’s for sure. The stock markets would gyrate beyond reason in all of this, and tank, while the dollar will crash to new lows, interest rates will spike up, and the credit ratings for US debt would be nicked to lesser grades, which in turn would evaporate US creditworthiness, and  deal an ultimate blow to the fragile economy.

The US economy is already in a soft patched recovery, a weak job hiring  market, a slow down in manufacturing, and a double dip recession in housing prices, and just one catastrophic blow may kill the golden goose. Democrats hope that public opinion may turn against the Republicans and they may cry uncle, and the Republicans are gauging that public may turn against the President and attribute to his many failures. They both may be right, and the game of chicken may just end up destroying a lot on both sides.

Raising the debt ceiling without cutting spending in the amount of $2.4 trillion dollar may be a right way to limit this practice of spending which has gone uncontrolled under the last 2 Presidents since 2000. George Bush raised the debt ceilings several times and racked up 7 billion or so  debt, and than President Obama was no less in tacking another few trillions in just under 2 and half years. To undo past mistakes, requires discipline, and a strict code of conduct. Default to most Americans is simply not acceptable and to put down this wild fire, there has to be some reasonable way to to stop digging a hole so big.

Complicating all of this is the President Obama, who is perhaps hated by the other side so much that they are not willing to concede any thing to him. The Republicans want to unseat him in 2012 and they will do anything to make that happen. The other side just can’t hide the dislike of him being the President. But the President himself is like a cool, calculated barracuda hiding below the surface staring at other floaters on the icy bottom, and ready to muddy the waters in a burst of opportunity to make a kill and win his point and free spending.  His recent press conference was just such an opportunity to muddy the waters before the kill. He chided Congress and speared them from the podium over debt talks.

Its true that the President came to office with an unprecedented debt sitting on his table in a bow and tie, waiting to be prodded and thrown off the perch. Things were not his fault, he has taken on and absorbed the worst mess any other President has ever received in recent times. He had 10 trillion dollars or more in debt. The whole political and financial system was about to buckle under. But as he always said ” Things will get worse before they get better” he yet,  he showed no talent in making things better, but made them worse.

{ 5 comments… read them below or add one }

Rachel July 5, 2011 at 12:25 am

unassuaged remorse inward-torment yes, i want write something partiality this unless didnt have mature years, may i repost this Obama s debt emergency 2011 | Finance News


immikeflimE July 5, 2011 at 10:45 am

I find myself coming to your blog more and more often to the point where my visits are almost daily now!


Mike Cordoba July 5, 2011 at 1:12 pm

Debt is what we provide and that is our business. But you need to borrow to live. This kind of debt is unlikely to be given any thumbs up.


floabaleUtept July 18, 2011 at 6:46 am

I just sent this post to a bunch of my friends as I agree with most of what you’re saying here and the way you’ve presented it is awesome.


Theda Decicco July 30, 2011 at 8:35 am

Some truly interesting information, well written and generally user friendly .


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