Thursday, July 21, 2011

How Would the Market React to no Debt Increase?

As I've previously explained, failure to raise the debt limit would involve shutting down one third of the government since the government is currently borrowing one third of the money its spending. Therefore, there is no reason to expect Aug 2nd to be as severe as a government shutdown.

Now we all know that the frankly disgusting scaremongering from Obama and his media herd about default and held up social security checks is false. All of the critical components of government could easily be paid out of the 2/3 of the spending that the government receives each month from taxes. The real crisis is that the government is spending 50% more than what it is taking in and racking up unprecedented levels of debt.

Now I remember the media screaming "armageddon" during the shutdowns in 1995 through 1996. How did the market react back then?

The market couldn't have cared less. But didn't the Republicans lose the shutdown? Well, Gingrich caved, but according to John Sides, the conventional wisdom that this helped Clinton isn't well supported. Sides shows that Clinton's approval rating actually when down during the shutdown crisis period:

Either way, the public understands that the spending is considerably more of a problem now. What happened in Wisconsin and New Jersey could not have happened in 1995.

Republicans need to hold firm and make their case to the public. Quite simply, for the last two and half years we're been spending 50% more than what we're taking in and creating a debt crisis that gets worse every month.

How long could a family with huge debts and a monthly income of $5000 expect to keep spending $7500 each month? Congress needs to lock up the credit cards until Obama agrees to a sustainable level of spending.


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