US debt

[fear_and_greed]

This must be that new super secret energy source GW was spouting off about last week...the Debt bomb.

 

WASHINGTON (AP) - Treasury Secretary John Snow notified Congress on Monday that the administration has now 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.

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.

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 Monday 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 (D-N.Y.) 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.

But Democrats contend the administration met its deficit-reduction goal only by leaving out major spending items such as the full costs of the Iraq war. They say the deficit will not improve unless Bush abandons his effort to make his first-term tax cuts permanent.

Senator Max Baucus (D-Mont.) said last week that under Bush, the total of the deficits has increased by $3 trillion, a 40 per cent increase from where the national debt - the total of previous deficits - stood when Bush took office in January 2001.

[foraker]

Our black helicopters can reach you too, you know.

[Dechristo]

somebody call Homeland Security.

[cj001f]

somebody call Homeland Security.

Michael Chertoff is to busy rubbing his hands with glee and chortling

[Dechristo]

gotta love the chortle.

[Stemalot]

$8.2 trillion US national debt...

 

somebody's gonna pay for that in the near future...if not now

 

I bet most people can't comprehend a trillion let along Americans.

[ScottP]

One trillion seconds of ordinary clock time =

 

( 1012 sec)/( 3.16 x 107 sec/yr) = 31,546 years

[StickBoy]

Not to worry, Bernanke will just print more money to pay of our debts.

[whidbey]

I wish I could do the math.. but it blows my mind. If the budget had stayed balanced in this period we could have divided 3,000,000,000 amoung us 298,255,535 fellow americans... talk about a party. What does that amount to for each of us?.. my calculator is so suck.

 

Bring on the tax cuts...

[Distel32]

8 trillion huh????

 

you take checks?

[Dechristo]

Hell, I can handle that on my debit card.

[jkeller]

I wish I could do the math.. but it blows my mind. If the budget had stayed balanced in this period we could have divided 3,000,000,000 amoung us 298,255,535 fellow americans... talk about a party. What does that amount to for each of us?.. my calculator is so suck.

 

Bring on the tax cuts...

 

A whopping $10.06 each

[G-spotter]

yeah but that's 3 billion not three trillion. three trillion would be $10,060 each. thats quite a bit of beer.

[Alpinfox]

$8,200,000,000,000.00/300,000,000 Americans = $27,333 for every person (taxpayer or not) in the US.

 

This goes along well with the news released today that the US individual savings rate was -0.5% last year. Previously, the annual savings rate had only been negative two times in American history; both times were during the Great Depression.

 

Things are looking great!

 

[G-spotter]

OK, but suppose every single American emigrated and was replaced by a Mexican. Would those Mexicans assume the debt along with the territory?

[tomtom]

This goes along well with the news released today that the US individual savings rate was -0.5% last year. Previously, the annual savings rate had only been negative two times in American history; both times were during the Great Depression.

 

Things are looking great!

 

And that the average credit card debt is $8000/person.

 

[KaskadskyjKozak]

This goes along well with the news released today that the US individual savings rate was -0.5% last year.

 

Is that defined to include contributions to 401(k) funds, IRAs and so on? Or is it only including standard savings accounts, CDs, and so on? Personally, I've probably put about 0% in savings the last few years, and a hell of a lot in to retirement funds.

[Alpinfox]

My understanding is that "savings" = IRAs, 401Ks, regular savings accounts, CODs, etc.

 

The new anti-consumer bankruptcy laws have been a godsend for the credit card industry, so they have made some very attractive offers, and consumers are charging like never before.

 

Anybody remember this story?

 

[Dechristo]

"The grasshopper went down to Georgia, 'cause he wanted to collect some souls..."

[JayB]

$8,200,000,000,000.00/300,000,000 Americans = $27,333 for every person (taxpayer or not) in the US.

 

This goes along well with the news released today that the US individual savings rate was -0.5% last year. Previously, the annual savings rate had only been negative two times in American history; both times were during the Great Depression.

 

Things are looking great!

 

 

I think that quite a bit of the negative savings rate can be explained by the rate at which home values have been appreciating in the past few years. There are quite a few people who looked at the difference between their purchase price for a home and it's appraised value, and concluded that they didn't need to save any money, because if things got bad they could always take out a home equity loan or sell the house and use the difference to compensate for whatever they hadn't been saving. Works out nicely in a booming market where asset values are uniformly rising, not so well in an environment where home values are flat to negative - even in nominal terms. I'd expect to see the savings rate trend in the other direction if the market changes and home values flatten out.

[cj001f]

I think that quite a bit of the negative savings rate can be explained by the rate at which home values have been appreciating in the past few years. There are quite a few people who looked at the difference between their purchase price for a home and it's appraised value, and concluded that they didn't need to save any money, because if things got bad they could always take out a home equity loan or sell the house and use the difference to compensate for whatever they hadn't been saving. Works out nicely in a booming market where asset values are uniformly rising, not so well in an environment where home values are flat to negative - even in nominal terms. I'd expect to see the savings rate trend in the other direction if the market changes and home values flatten out.

 

That explains at least some of it. I know of numerous people who've taken out home equity loans, or taken out equity when refinancing. Some used it to pay off credit card debt (probably wise) others used it for boats and cars (not so wise)

[KaskadskyjKozak]

I think that quite a bit of the negative savings rate can be explained by the rate at which home values have been appreciating in the past few years. There are quite a few people who looked at the difference between their purchase price for a home and it's appraised value, and concluded that they didn't need to save any money, because if things got bad they could always take out a home equity loan or sell the house and use the difference to compensate for whatever they hadn't been saving.

 

Home equity loan - I can see that.

 

Sell your house? I think there's flawed logic there. If your house is appreciating, then generally so are those around you. You'll either have to downsize, or move farther from where you'd like to be, or to a less-desirable area (e.g. higher crime, poor schools).

[chucK]

or rent

[Jim]

The savings rate only includes the percent of savings from disposable (after tax) income. Because 401ks are the vehicle of retirement savings these days I suspect the savings rate is a bit higher, but not much. that said, 401ks are woefully underfunded, the average balance is around $2,000 and for 50 year olds it's around a whopping $80k. Good luck with that.

 

Many folks look to their house as their retirement savings account and mortgage up to their eyeballs. Not a good idea.

[JayB]

I think that quite a bit of the negative savings rate can be explained by the rate at which home values have been appreciating in the past few years. There are quite a few people who looked at the difference between their purchase price for a home and it's appraised value, and concluded that they didn't need to save any money, because if things got bad they could always take out a home equity loan or sell the house and use the difference to compensate for whatever they hadn't been saving. Works out nicely in a booming market where asset values are uniformly rising, not so well in an environment where home values are flat to negative - even in nominal terms. I'd expect to see the savings rate trend in the other direction if the market changes and home values flatten out.

 

That explains at least some of it. I know of numerous people who've taken out home equity loans, or taken out equity when refinancing. Some used it to pay off credit card debt (probably wise) others used it for boats and cars (not so wise)

 

I've seen some data concerning how much the latter of the two accounts for US economic performance since 2000.

 

 

I think there's some equally alarming stats on how much of the job-creation since '00 is tied directly to an increase in real-estate spending. I guess we can hope that the constellation of factors that's keeping bond yields low at the moment stays in effect and the 1 trillion worth of adjustable rate mortgage debt that's set to reset before the end of '07 won't have as much impact on the economy as some people fear.