There’s a difference between a genuine debt and a cash flow issue.
The United States has borrowed fourteen trillion dollars. We owe it now and we’ll still owe it next week. It’s not like we’re asking our landlord to wait for the rent until the bank opens Monday and we can cash our paycheck.
A case study from the Washington Post, which posts an editorial praising the Maryland legislature for standing up to the public-sector unions and curbing pension costs. The kicker comes near the end:
…oh. So after this heroic effort, in another 10 years the pension might be just 20 percent under-funded…assuming a rate of return over three times the likely growth rate of the economy.
The same culture was entrenched when Bill Clinton stopped and reversed the increase in the federal debt, so obviously it’s not an insuperable obstacle.
Bill Clinton’s presidency benefited from incredible gains in tax revenue, but to his credit he was fiscally responsible enough not to turn around and spend it all.
If you are looking for a simplistic answer to your OP, then “yes”, it is technically possible but it is also politically impossible. You can never get around politics when talking about government budgeting and spending.
What people are trying to explain is that it’s not really even technically possible.
The OP is getting deficit and debt confused. The US already has a massive debt. Simply shutting down doesn’t fix the debt. Basically, the OP is looking at some kind of “on paper” way of making the deficit look better by waiting for more revenue to come in before spending it. It doesn’t help the trillions of dollars of debt that have already accrued.
Also, it doesn’t even work for larger businesses or wealthier families. This kind of stunt might work for small business, but it’s not how the big multi-nationals or even larger US-only companies operate. They all take short term loans to cover short term expenditures. Of course, their long term viability has to be good to ensure decent loan terms, but they can’t operate as widely as they do without some form of credit.
Ditto wealthy families or individuals. Many of them also take loans or open lines of credit because they’ll make better income keeping their funds illiquid in the markets, rather than using it to pay off their obligations. So, they often take loans out to cover some of their expenditures. Even middle class families do this (like home equity lines of credit).
So, even on the face of it, the OP is asking if the federal government can accomplish something the most successful businesses and families don’t even try to do.
So if you want a factual answer, then not paying one’s bills for a day (or two or a month) does nothing to reduce the size of one’s debt. If anything, it increases it, because interest will continue to accumulate on the amount owed.
Does that help?
The problem in Washington is programs called “entitlements”. Things like medicare - where they promise to pay the medical costs of basically poor and old people, is a good example. There is no control over these costs. Politicians like to expand the scope of such programs to add services and cover more people without admitting how much it will cost. There’s a limit to what you can do - if you refuse to pay for a treatment, then either the person dies, or they have an ongoing problem that costs just as much… If you try to limit what you will pay a doctor or hospital, then they limit how many such patients they will see; either long waits, or it’s the same effect as not paying - the patient dies. If you force doctors to take patients, they move to areas where the mix of medicare to paying patients is better - same effect - waiting lists or no doctors for inner-city hospitals. And so on… Once you promise to apy medical expenses for the poor, that’s an open ended and ever-growing obligation. New procedures wihch everyone wants cost more, fancier new drugs cost more, the cost of Medicare expands much faster than inflation…
Pensions are another good example. A pension is "we’ll pay you less now in return for promising to pay you more later, even when you stop working. If you cut pensions, you are essentially taking money a person has already earned. The USA has very lax rules on having pension funds paid up, so the politicans can promise the moon to civil servants and plan to pay later… long after they’re out of office. Social Security is just a bigger example of the same thing.
Having overspent for decades (except for Bill CLinton) the government owes hundreds of billions, even just in interest let alone paying down the debt. If you refuse to pay, you short not just the Chinese but social security and the pension funds and savings of millions of citizens. Screw over the people who lend you money and good luck borrowing any money next time at anything less than loanshark rates of interest.
So you can cut bureacracy, or road spending (after all, how often do brdges fall down?), or health inspectors - but far more than half of the government spending is committed and cannot be cut without major pain.
The recent budget debate was over 33 or 60 billion for a budget of 2 trillion and a deficit in the hundreds of millions. It does not stop overspending, it barely slows it down.
The solution is simple - tax more, spend less. After several decades of hardship, crumbling roads and decaying infrastructure, and the heck with anyone overseas who needs US help and support - America will have a balanced budget and no debt, just in time so some politican can start the whole mess all over again. The tea-party side of things seems to think raising taxes or even not cutting them will still work. The more liberal types think that there’s a huge amount of taxes just waiting out there if only we’d screw over the economy and all the “fat cats” so there’s no need to reign in entitlements (even if they could). Both are right and wrong.
No it isn’t. Recipients of defined-benefit pension plans were guaranteed a certain level of retirement income. Social Security has never guaranteed those paying in any specific rate of return.
Uh, absolutely…no! Government is not businesses or households. It is a distinctly different thing that is not comparable. That’s why so many go wrong when they offer idiotic platitudes about running government like a business, and why most business people don’t do well in government. Government can’t stop. It is continuous and must always be. That is the GQ answer. Your assumptions are wrong otherwise.
I suspect that on April 18, and perhaps a few days before, the government took in more money than it paid out. Ditto the day estimated taxes are due. Or the day of a big bond sale.
:eek: I don’t know! Our mightiest weapons are powerless against it! Wait! I’ve got it! We’ll lure the federal debt to the hydroelectric power plant!
No he isn’t.
The issue I’m trying to get at is the debt ceiling. At some point, somebody or some thing (an official debt clock?) is going to decide that our ongoing deficit has caused our debt level to increase beyond a legal limit.
Then the sky is going to fall… or not. I was inquiring about the possibility of certain spending procedures which might possibly stop the growing debt just prior to hitting that level… and not allow spending to exceed revenue going forward.
There are a number of things that can be done to forestall the precise date in which we would bump up against the debt limit. For example, part of the government retirement system is manipulated to postpone the issuance of debt. Really, these tactics can only buy some number of weeks of allowing the government to stay below the debt limit.
But these are just gimmicks, like your example of deferring bills until someone’s next paycheck comes in. They are not in any way a solution to the deficit or the national debt, they only deal with short-term cash flow issues.
I have a hard time figuring out what you are driving at: are you really suggesting that a financial trick akin to post-dating checks would actually resolve someone’s long-term debt?
That’s still a deficit issue. The overall debt is still going to be there, even with a completely balanced budget. We’d need revenue to consistently exceed expenditures to pay down any debt. That true of governments, households, and businesses.
We’re currently scheduled to reach the debt ceiling sometime in May (I think).
As I noted above, by doing some magic accounting schemes (much like you suggest), Geithner is suggesting that Treasury might extend the time until we need to exceed the debt ceiling until early July. But, it’s not technically, legally, nor politically possible to extend government spending past that without raising the debt ceiling.
Mind, all that is actually just to handle the deficit. It doesn’t even begin to address paying down the debt.
And again, cute accounting schemes might work for small businesses, but it’s not the way large businesses work. The bigger players do take out loans and can’t keep their debts from growing bigger (think Ford or GM before they tanked and rebounded).
GQ answer. There are none. The debt ceiling will be pierced unless there is an instant decision to stop spending 40% of the current years’ allocations and pass a balanced budget for the next year that is equivalent to a 40% cut in spending. That is an excellent definition of the sky falling.
Non-GQ answer. You’ll notice that nobody of either party is suggesting a plan that is remotely close to a 40% cut. Not raising the debt ceiling is a political game that will end as the recent government “shutdown” did. By not happening.
Its probably a bit of both.
You can’t raise enough money to balance the budget without approaching confiscatory levels.
You can’t do it with spending cuts without gutting medicare/medicaid (gutting medicare/medicaid PLUS cutting taxes is nucking futz but taht’s besides the point).
If you take Ryan’s plan and you build in Clinton’s tax rates, you can adjust the medicare cuts to almost nothing. Of course if you want some of the other stuff that Ryan cut, you’d have to increase taxes beyond where Clinton had them (perhaps roll them back to reagan era rates) or you would need slightly deeper cuts to medicare/medicaid.
Why do we want to?
If you had a credit card with no limit that was only costing you about 3% interest, would you pay it off?
If 2/3 of the interest you paid was going right back in the pockets of the people that paid you the money to pay the interest bill in the first place, would you pay it off?
If you could just print more money to cover the other 1/3 or any of it if you are a little short this month, would you pay it off?