U.S. Government Reaches Debt Limit Again

Posted: May 17, 2011 in Debt
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The U.S. government reached its debt limit ceiling of $14.3 Trillion dollars. That’s the equivalent of each person in the U.S. spending 60% above their budget. Isn’t this excessive spending, easy credit got us into this debacle in the first place? Does Subprime loans ring a bell? Didn’t matter what your FICO score was, we were going to lend you money.

Or one of our local commercials that say…We don’t care about your credit we care about YOU! Really??? When you stop paying because you cannot afford it, how much will he care about you then? Or will it be someone else’s problem because the loan was sold. Another example of kicking the can down the road.

The debate over raising the debt limit will gain more urgency, after the federal government officially hits the $14.3 trillion ceiling today.

Even though the government has the tools to stave off a default of government debts until August, lawmakers this weekend were ramping up the debate, laying out demands and issuing warnings about the $14.3 trillion debt.

One just needs to look across the pond to Europe, where the sovereign debt is bubbling to a crisis. The U.S. is not too much further behind with our current path. The biggest bubble in history is the bubble of government debt. It is a bubble in a world full of pins. It will take a great deal of luck and crisis management to keep it afloat, without wreaking havoc on the financial system and markets of the world.

What happens when you come to the end of the road? The European answer seems to be to haul in the heavy equipment and extend the road. What about here in the U.S.? Continue to up the debt ceiling? Cut spending? The U.S. government has grown dramatically under this administration. In fact more people are on welfare than anytime in history. Debt projections are even greater now than this graph predicts, possibly topping $1.7 Trillion for 2011. This administration wants to keep spending, throwing parties and printing money. Gas prices are at all time highs, groceries are going up, inflation is starting to take hold.

Did you know that a 10% automatic increase in spending is built into the budget?

Obama Budget Deficit

The Administration’s Home Affordable Modification Program (HAMP) was a bust. Tightening lending standards, the renewed decline in-house prices, fears of job loss as unemployment remains high and the drying up of mortgage securitization have handily offset the positive effects of low mortgage rates and new homeowner tax credits. Indeed, the jumps in home sales in anticipation of the tax credit expiration first in November 2009 and then in April 2010 were promptly retraced and followed by still-weaker sales.

Home Sales

Let’s be serious here. Everyone knows the debt ceiling will be raised. All this politics is about preventing (or gaining) spending concessions. Obama and the Democrats wants to raise taxes, the Republicans want to reduce spending.

The debt ceiling is a game of chicken to see who blinks first and by how much.


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