Monday, August 10, 2009

Geithner Asks Congress for Higher Debt Limit

Of course. We have to buy those Gulfstream jets for Congress.

Geithner asks Congress for higher US debt limit (8/7/09 Reuters)

"WASHINGTON (Reuters) - U.S. Treasury Secretary Timothy Geithner formally requested that Congress raise the $12.1 trillion statutory debt limit on Friday, saying that it could be breached as early as mid-October.

""It is critically important that Congress act before the limit is reached so that citizens and investors here and around the world can remain confident that the United States will always meet its obligations," Geithner said in a letter to Senate Majority Leader Harry Reid that was obtained by Reuters."

Hmmm... So, raising the debt limit to borrow more is supposed to somehow impart confidence in the investors around the world that the U.S. will always meet its obligations. By issuing more debt. That must be comforting. It's called "Borrowing from Peter to Pay Paul", or "ponzi scheme". Japanese call it 自転車操業 - a bicycle operation (if you stop pedaling, you and the bicycle will fall down). It could also be called "musical chairs" - you don't want to be the last one standing, holding the bag.

The debt limit has already been twice raised this fiscal year. The first was October 3, 2008, and the debt limit was raised to $11,315 billion. The second was February this year, after the stimulus bill passed Congress and was signed into law; the debt limit was raised to the current $12,104 billion.

Here're the recent debt limit numbers from Congressional Research Service "The Debt Limit: History and Recent Increases" (April 7, 2009):

The debt limit increased 78% in 10 years from 1998 to 2008. The U.S. GDP grew 29% (from $10,508 billion in Oct 1998 to $13,142 billion in Oct 2008, in 2005 dollars; data: St. Louis Fed) during the period, and the U.S. population grew 10% (data: St. Louis Fed).

We are not going to pay this back, are we?


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