The Consequences of Federal Default

[KMRblue1027]

Since time actually seems to be running out on passing a budget, we been in a shutdown for over a week now what exactly would happen if the US defaulted? I can't really find a good either historical or predictive model. Anyone with an economics or law background care to chime in?

 

[galdre]

Most of the top 1% would profit, and the masses would suffer.

So pretty much business as usual.

 

[Antilogic]

First, just to be clear--the Congress could still raise the debt ceiling while keeping the government shut down, or pass a budget so draconian that it brings the deficit immediately to zero. In both cases, no default would occur.

Most experts say the consequences are unpredictable but bad. Many nations have explicit clauses written into their bonds that say what happens in the case of default. The US treasury bonds do not have this language because it was never perceived to be necessary. As I understand the structure of the current payment system, it's impossible as of right now to prioritize particular payments out of the treasury.

So TL/DR is that particular payments are not, as of right now, guaranteed or prioritized over others, and there's no way to actually do that before the deadline.

 

[Tahuti]

You can't predict what will happen. That's a fools endeavour. Even historical defaults are not necessary comparable with what might be happening soon.

However, the real weakness is not default. The real weakness is prolonged government shutdown. If the Federal government becomes a useless husk that costs the states only money, it may become tempting to secede. It probably won't come that far, but this is an obvious weakness.

 

[bhsup]

pass a budget so draconian that it brings the deficit immediately to zero.

Solution.

 

[KMRblue1027]

Solution.

A one way ticket to a depression?

 

[Antilogic]

Nah, we'll just end the special preferences for capital gains and carried interest and tax them at the regular income tax rate. Then jack the top marginal rate up to 90% like it was under that evil commie Eisenhower. We'll be able to pay down that debt real quick and have more than enough to spare for investment.

 

[KMRblue1027]

If only... If only...

 

[bhsup]

If we can come out of the depression with a functioning economy, government and budget that is actually paying off our debt and not adding to our deficit anymore? Yes, that's worth a depression.

 

[Antilogic]

I'm certain the average rich guy on Wall Street would be quite depressed the gravy train came to such an abrupt end.

 

[KMRblue1027]

If we can come out of the depression with a functioning economy, government and budget that is actually paying off our debt and not adding to our deficit anymore? Yes, that's worth a depression.

Considering the current political climate, a major depression probably would be the end of the United States. Is that your plan?

 

[Antilogic]

Or it could inaugurate two decades of evil Rooseveltian socialistic progressivism. So yeah, end of the country according to the teahadists.

 

[KMRblue1027]

Or it could inaugurate two decades of evil Rooseveltian socialistic progressivism. So yeah, end of the country according to the teahadists.

I'm not sure if that could happen this time though. Was the US as fractured during the 20s, and the whole mass media system begs the question of who's side they are on?

 

[illram]

Well one of the consequences would be a fascinating political and legal dilemma. Does the President ignore Congressional inaction and continue borrowing the money anyway?

 

[Cutlass]

If we can come out of the depression with a functioning economy, government and budget that is actually paying off our debt and not adding to our deficit anymore? Yes, that's worth a depression.

We could accomplish the same thing without a depression. All we need to do is toss all the Teahadists in Gitmo as illegal enemy combatants out of office.

 

[DinoDoc]

We could accomplish the same thing without a depression. All we need to do is toss all the Teahadists in Gitmo as illegal enemy combatants out of office.

Which Teahadist scum is being quoted here?:

"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 cannot pay its own bills. It is a sign that we now depend on ongoing financial assistance from foreign countries to finance our Government’s reckless fiscal policies. ...Increasing America’s debt weakens us domestically and internationally. Leadership means that 'the buck stops here'. Instead, Washington is shifting the burden of bad choices today onto the backs of our children and Grandchildren. America has a debt problem and a failure of leadership. Americans deserve better."

Additional quote from the scumbag:

The problem is, is that the way [the President] has done it over the last eight years is to take out a credit card from the Bank of China in the name of our children, driving up our national debt from $5 trillion for the first 42 presidents – #43 added $4 trillion by his lonesome, so that we now have over $9 trillion of debt that we are going to have to pay back — $30,000 for every man, woman and child. That’s irresponsible. It’s unpatriotic.

 

[Murky]

I think people like Sen Cruz are far more dangerous than most realize.

 

[KMRblue1027]

Which Teahadist scum is being quoted here?:

It's Obama and you can clearly put together logically that 2006 is very different from 2013. We should have had a surplus throughout the entire Bush Administration and Obama was arguing for repelling tax cuts not cutting spending. If taxes could be raised back to Clinton Era levels and the Capital gains loophole nonsense was gone we wouldn't have this problem would we?

 

[Kyriakos]

Considering that the US, only ten years ago, or at most 12, at that all-important 2001, was still a massive economic force (despite being infested with a lot of problems like other western countries) and that now almost complete erosion has manifested (including a rather frightening social break-up on very alienating lines, often even of the entirely racial type) i wouldn't be hopeful it can recover, and pull the rest of the west to recovery too.

In fact it seems that the opposite will happen, and possibly even soon. I do hope, though, that things will not get hellish. Like i said, i do not like at all how they are already looking, though, and there is nothing to signify a reverse of the collapse.

 

[downtown]

However, the real weakness is not default. The real weakness is prolonged government shutdown. If the Federal government becomes a useless husk that costs the states only money, it may become tempting to secede. It probably won't come that far, but this is an obvious weakness.

We are not even CLOSE to that level.

A shutdown is a huge pain in the butt. It puts people out of work, is devastating for the economies in Maryland and Virginia, and can have long-term repercussions...but it also doesn't impact the day to day lives of a LOT of Americans. Defaulting on our credit obligations absolutely will.