Bernanke to Congress: We're much closer to destruction than you think

[Danke]

Well for every action...

If we repudiate the national debt, there are still unfunded liabilities (public debt). How will grandma get her Medicare/Social Security? Once the US refuses to repay it's debtors, and the Fed won't print the dollars, then we have: 1)No one to borrow from 2)No way to steal from our unborn grandchildren via Bernake. Obviously it would result in a huge upheaval of desperate hungry souls, and tremendous death. The idea is to avoid all of that bad stuff, and somehow keep along how we are and slowly get pay our way out if we can. All eyes on Europe. Let's hope Congress can learn something from all this.

In your imagination. But I believe these problems can be fixed with the now unimaginable debt and its repudiation relief to individuals and the economy without the burden of the current debt drain.

[Zippyjuan]

The gradual cutting spending and raising taxes is probably the most gentle (read: logical) thing to do approaching this weak economy. Unfortunately, we have a Congress that is beyond worthless. They will be gridlocked until Europe's collapse worsens IMO. Then they will see we must change our ways. ( At least I still have some hope that they will )

If they continue as they are doing, the unemployment will basically stay around the same amount, but in a slightly upward motion. Money printing and propping up zombie banks goes a long way when you think about it. It's delaying the inevitable, but it is at least holding somewhat steady.

Cutting $1T is scary. It's what we need ultimately yes, but with our unemployment and economy, it's a HUGE risk. Reagan got lucky as the debt was nothing compared to now. We are now in even more uncharted territory. Honestly, who knows what would happen if the cuts came through Congress? It's fun to think it would work but there is no example because the numbers have never been this large. The magic number for unemployment before the government is overthrown might be 30%, we don't know! And Congress sure doesn't want to find out either. Hah!

Reagan also recognized that the tax cuts he pushed through early in his term were having an adverse effect on the deficit and followed that up with more tax INCREASES which at the time were the biggest on record. Ron Paul too has said that you need to get the budget balanced and reduce the debt before you make any major changes in reducing taxes.

So 300 Billion a year in reductions is your number?

Yes, that would be my target. That would get you to a balanced budget in three years without a dramatic negative impact on the economy. Do I think it will happen? No.

I think fear of its impact on the economy is why Obama never pushed to get the the suggestions of the Budget Deficit Reduction Committee passed by Congress. Now he can let the automatic reductions for next year happen and avoid any political blame for the outcome. There are going to be some huge budget battles coming up.

[Zippyjuan]

You don't think raising taxes will not have a dire effect?

It depends on how the taxes are structured. Some (basically the rich) are better able to absorb a tax increase without it dramatically changing what they do. This is the same reason that if you want to use tax cuts to stimulate spending you want to give the money to those most likely to spend it- which would be those at the lower end of the income scale. Same for businesses. Large corporations have massive money sources and many actually end up paying little to no money in taxes to the government while a smaller business may be month to month survival- higher taxes on them could put them out of business. Large companies right now are sitting on over $1 trillion in cash while small business is wondering how much longer they can hang on or where they are going to get enough money this month or quarter to pay suppliers or workers.