The Federal Debt Limit – A Mechanism to Fool You and Allow Politicians to Grandstand

Well, the Treasury just authorized bond sales today that will put the US over its current $14.5 Trillion debt ceiling limit when the three and 10 year notes settle on Monday.  Did the earth shake?  Did the seas rise?  NOPE!

The federal debt Limit or Ceiling whichever you like is actually neither.  It has become nothing more than a topic to be demagogued by both sides of the aisle.  Here are a few facts that should either scare the do-do out of you or really tick you off or both:

  • The federal debt limit is really not even the total amount of debt owed by the Federal Government.  Government-Sponsored Enterprises, GSEs, like Fannie Mae, can borrow their own money OUTSIDE OF THE FEDERAL DEBT EVEN THOUGH THE US GOVERNMENT IS THE GUARANTOR OF THAT DEBT!
  • Only 57% of the Federal Debt is actually held by someone other than the government itself!
  • 43% of the Federal Debt is actually held internally in the Federal Government in trust for Social Security, highways and airports, and other purposes.  It is like you borrowing $5.00 from your wife.  The total family debt really isn’t increased.  Your wife may disagree, however!
  • So, the Big Deal about the debt limit is actually over 57% of the actual debt ($8.6 Trillion).  Excluding any external debt incurred by GSEs which is “off book”.

The big deal is the deficit itself and the insane spending that both Democrats and Republicans are responsible for!  TEA PARTIES, don’t get distracted by the debt ceiling debate and focus on CUTTING SPENDING, AND A LOT OF IT!  It really doesn’t matter in the long run what we do with the debt ceiling if we don’t cut spending significantly.  Uncle Ben Bernanke can always print Cousin Obama a few more bucks.  After all, it is your life’s savings they are squandering.  They have a nice pension to fall back on that is indexed!

FOCUS ON SPENDING CUTS…FOCUS ON LOWERING CORPORATE TAX RATES…

FOCUS ON LOWERING PERSONAL INCOME TAX…FOCUS ON ELIMINATING CAPITAL GAINS TAXES!

RD Pierini

http://old.nationalreview.com/nrof_bartlett/bartlett021802.shtml

http://en.wikipedia.org/wiki/United_States_public_debt#cite_note-115

http://www.nasdaq.com/aspx/stock-market-news-story.aspx?storyid=201105111542dowjonesdjonline000477&title=treasury-auctions-to-take-us-over-debt-ceiling-on-monday

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