2011 US debt ceiling

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In the summer of 2011, the Obama administration and the Democrats arrived at a standoff with the majority GOP over the troubled US federal budget. The GOP refused to allow a raise in the federal debt ceiling without severe cuts to social services, while Obama and the Democrats refused to allow those cuts, often describing them as "draconian".

As of this writing, the standoff is still in effect.


In truth, the proposed cuts would not only have imposed severe hardship on citizens already hard-hit by the ongoing 2008 economic recession, but also were completely unnecessary as the deficit could easily have been reduced significantly by reinstating tax cuts for the rich initiated during the Bush-Cheney administration and almost completely eliminated by discontinuing the wars in Iraq, Afghanistan, and (most recently) Libya.

Both of these items (discontinuing the wars and re-taxing the rich) were, however, politically non-discussable due to the ever-increasing influence of the very rich, the most influential of whom neither wished to pay their fair share towards keeping the country running nor to reduce their income streams from contracts servicing those wars -- which, by this time, had become little more than an excuse for funneling other people's money from Federal coffers (owned by all Americans) into their own hands, where those funds could then be used to further dominate the political process in a vicious feedback cycle.

As a result of these cash-cows being off-limits, the only significant gap-closers available for discussion were, of course, the public services vital to many people.

secondary conclusions

  1. It seems odd that we would be talking about needing to borrow more money when apparently the Fed currently has about $1.7 trillion in unused banking funds, much of which represents bailout money given to the banks in 2008 for the purpose of loaning to citizens in need. The banks did not do what the government was (supposedly) expecting them to do with the money, but have instead put it in the Fed for safe-keeping while remaining reluctant to loan money to those who need it most. Shouldn't the government be at least borrowing from this reserve -- if not reclaiming it outright -- instead of reducing social services (and possibly raiding Social Security funds)?
  2. A somewhat complicated argument:
    • The Republicans are "refusing to give in" on raising the budget ceiling, and the Dems are "refusing to give in" on not doing that because of all the terrible things that would happen if we don't. Debt defaults, doom, destruction, and desolation.
    • The people who would get hurt if a default were to happen, however, are not people that the Republicans support. Sure, "Main Street" would get hurt; that happens very easily when powerful people take any substantial action. But in this case, "Main Street" would just be getting caught in the backwash.
    • The real damage would be to the banking system and Wall Street -- the big money, loaning-and-borrowing-everything economy.
    • These are the people the Republicans primarily support, however,
    • As is well-known by most informed observers at this point, the Dems and the GOP are really just playing good cop/bad cop politics with the voters. It's all theatre. The GOP role is to be anti-big-finance -- so they have to pretend like they don't care if the country defaults. The Dem role is to pretend that they care what happens to the voters. So they have to act as if that is what is at stake.
    • After some initial pain, however, the voters would benefit in the long run if the banking system collapsed.
    • So the GOP actually can't afford to not raise the debt ceiling. It would kill their real base.
    • Prediction: At some point they will "reluctantly" "give in" to Democrat "demands" -- after getting a whole bunch of "reluctant" "compromises" from the Dems -- and business will go on as usual.
    • Meanwhile, political planners somewhere are laughing hysterically at having manipulated (a) the GOP into defending a stance which would ultimately kill them, and (b) the Dems into taking a stance which hurts their base while trying to convince that base that their stance is the only one that will prevent pain and suffering.