Monday, March 06, 2006

USA the newest third world country

You'd think this would be the wake up call that George Bush is an incompetant leader and that the illegal war is too expensive. But, if the citizens of the US couldn't figure it out based on all the other indications they've had so far, I guess it would be too optimistic to imagine that this will clue them in.
If anyone is interested in seeing what the future holds for the US economy, check out a great documentary The Take, but Naomi Klein and Avi Lewis about the economic collapse in formerly affluent Argentina.

Washington close to U.S. debt limit
Mar. 6, 2006. 01:59 PM

WASHINGTON — Treasury Secretary John Snow notified Congress today that the administration has taken "all prudent and legal actions," including tapping certain government retirement funds, to keep from hitting the $8.2 trillion US national debt limit.
In a letter to Congress, Snow urged legislators to pass a new debt ceiling immediately to avoid the country's first-ever default on its obligations.
"I know that you share the president's and my commitment to maintaining the full faith and credit of the U.S. government," Snow said in his letter to leaders in the House and Senate.
Treasury officials, briefing congressional aides last week, said that the government will run out of manoeuvring room to keep from exceeding the current limit sometime during the week of March 20.
Snow in his letter notified legislators that Treasury would begin tapping the Civil Service Retirement and Disability Fund, which Treasury officials said would provide a "few billion" dollars in extra borrowing ability.
Treasury officials also announced that on Friday they had used the $15 billion in the Exchange Stabilization Fund, a reserve that the Treasury secretary has that is normally used to smooth out volatile movements in the value of the dollar in currency markets.
Treasury has also been taking investments out of a $65.3 billion government pension fund known as the G-fund.
Officials have said that once the debt limit is raised, the investments taken out of the pension funds would be replaced and any lost interest payments would be made up. The formal title for the G-fund is the Government Securities Investment Fund of the Federal Employees Retirement System.
Democrats hope to use the upcoming congressional debate over raising the debt limit to highlight what they see as the failings of the administration's economic program with its emphasis on sweeping tax cuts.
An actual default on the debt, a situation when the government misses making payments to current bondholders, is a doomsday scenario considered highly unlikely given what it would do to the government's credit rating.
It is expected that after intense debate, Congress will approve an increase in the current $8.18 trillion debt limit by perhaps $781 billion.
But Representative Charles Rangel, the top Democrat on the House Ways and Means Committee, said today that any further increase in the debt limit should be tied to legislation that would get future deficits under control.
"Simply raising the limit on George W. Bush's credit card and crossing our fingers won't solve anything," Rangel said in a statement. "Any long-term debt limit increase must be accompanied by a serious effort to bring our budget back to the balance we achieved under the Clinton administration."
Treasury Department spokesman Tony Fratto said it was critical for Congress to act before leaving for a spring recess on March 17. He said Snow planned a number of meetings with legislators this week to discuss the urgency of taking action.
The administration has sent Congress a budget that on paper would cut the deficit in half by 2009, the year President George W. Bush leaves office.


Trib said...


yrautca said...

Here is an example for you:

The retirement benefits of millions of Americans is secured by an Insurance program called PBGC. PBGC charges employers who offer retirement benefits an annual premium. Turns out the budget bill 2006 will increase this premium from $19 to $30. But thats not all.

The premium raised by PBGC is considered federal revenue. Moreover receipt of this premium is accounted for on a cash basis, whereas the benefits are accounted for on an accrual basis. Hence, the govt immediately raises substantial revenue without recognizing any liability on its books.

Amaing eh?

Jennifer said...

Are you saying that's a good thing? Or that he's and evil genius (more likely that he keeps evil geniuses on staff)? Or what?
Amazing good? Or amazing bad?

yrautca said...

Amazing bad of course. they are using insurance premium to run the government. BTW the premium quoted is per participant. This translates into billions of dollars.