A commenter notes:
The debt ceiling problem if you think it is going to go away your stupid because this country is headed for insolvency. All we do is give our $ to other countries and all we do is take it in the ass.
I do not believe that the US is headed for insolvency. A nation with fiat currency that prints its own money can and will always pay its bills. There’s no problem with that. The only problem is whether or not the US has the will to pay its bills. It will always have the means, that is beyond dispute.
However, with the debt ceiling debate, some in Congress decided that the US government would decide via willpower not to pay its bills, even though the US of course always has the means to pay its bills. That is part of the real problem with the debt downgrade – that there are politicians who will deliberately force a default on the US bills for purely ideological reasons.
Interest payments on debt as a % of GDP are only 1.4%, which is very low by historical standards and as compared to other countries.
The problem is that we are being insane about deficit reduction. There is only one way that sane nations do austerity – you raise revenues via taxation or fees and you cut spending. We are trying to do austerity by purely cutting spending without raising any revenue at all. It’s pure economic insanity, and there’s hardly a sane economist alive who thinks this is going to work. So we aren’t doing austerity at all – we are just doing insanity.
The Republican Party, by demanding massive cuts with no revenue increases, is setting the stage for future recessions and depressions, and is not operating with any kind of economic sense that any sane economist anywhere would recognize. So we aren’t doing austerity at all. We are just doing government-killing.
This is just a Libertarian get the government so small we can drown it in a bathtub project. That’s not an austerity project. It’s a Libertarian kill the state project. And it won’t work. When you kill the state, all you end up with is the 3rd World. Look to the 3rd World if you want to see what happens when the rich and the capitalists run everywhere and the state is emasculated, defunded and neutered.
During an economic downturn, the state must increase spending as a stimulus in order to get the economy going again (Keynesianism). Not all economists believe this – neoliberals don’t – but neoliberal theory has never worked anywhere. Keynesianism at least has the advantage among economic theories of being tried and tested. Austerity and slashing spending during an economic downturn will only make matters worse. The current round of slashing – $2 trillion worth – may well cause 10 years of recession to depression.