' PAY CHINA FIRST ' -- Republicans' Wild Plan To AVOID U.S. Debt Default

[Segami]

:smoke: :smoke: :smoke: :smoke:


:puke:






" New Republican legislation in the House and Senate would force the U.S. government to reroute huge amounts of money to China and other creditors in the event that Congress fails to raise its debt ceiling.


"I intend to introduce legislation that would require the Treasury to make interest payments on our debt its first priority in the event that the debt ceiling is not raised," Sen. Pat Toomey (R-PA) wrote in a Friday Wall Street Journal op-ed.


If passed, Toomey's plan would require the government to cut large checks to foreign countries, and major financial institutions, before paying off its obligations to Social Security beneficiaries and other citizens owed money by the Treasury -- that is, if the U.S. hits its debt ceiling. Republican leaders insist they will raise the country's debt limit before this happens. But first, they're going to try to force Democrats to accept large spending cuts, using their control over the debt limit as leverage. That means gridlock, and the threat that they'll come up short.


- The Administration thinks such a policy would be tone deaf. "Such a policy would also be unacceptable to American servicemen and women, retirees, and all other Americans, who would rightly reject the notion that their payment has been deemed a lower priority by their government," Wolin added.

The top Democrats on the House and Senate Budget Committees call it a jaw-droppingly bad idea



cont'

http://tpmdc.talkingpointsmemo.com/2011/01/pay-china-first----republicans-wild-plan-to-avoid-us-debt-default.php?ref=fpb



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[Statistical]

1. China only owns 5% of our debt. Americans own the majority.

All foreign entities own less than 25%.

Largest single entity holding Treasuries is the Social Security Administration.
Pension funds and life insurance companies are major purchasers of US debt.

It does raise an intesting question.
If the debt ceiling isn't raised and there is a shortfall how does the Treasury decide how gets paid and who doesn't? Is it based on the discretion of the Treasury?

[WinkyDink]

12. Where is that % from? I have 24%, as of 2010:

China’s share of U.S. bills, notes and bonds in January amounted to 24 percent of the total $3.7 trillion in Treasuries owned by investors abroad, up from 19 percent three years ago, according to Treasury data.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=avsB.BdWGdIE

[Statistical]

13. "24% of treasuries owned by investors ABROAD."

Key word abroad.

Foreigners combined only own about 20% of federal debt. Of that China owns about 25%. 0.20 * 0.25 ~= 5%

So China owns roughly 5% of debt. Other foreigners only roughly 15% combined.
Americans (both private and public) own about 80% of federal debt.

Another way to look at it.
http://en.wikipedia.org/wiki/United_States_public_debt

Total federal debt $14.03 Trillion
Debt owned by China $895 Billion (0.895 T)

% of total debt owned by China 6.3%.
% of total debt NOT owned by China 93.7% :)

[Cali_Democrat]

14. True.

The notion that China owns all our debt is overblown.

Japan owns nearly as much of our debt as China, but you rarely hear about it.

[jdp349]

25. Just wondering

China owns 6.3% of our total outstanding public debt but I wonder what percentage of total outstanding US T-bonds/bills China owns issued in recent years, mostly since the financial crisis.

I'd love to see the data of who is financing newly created public debt.

If we anticipate that need to further finance public into the future and total debt beg spending then obviously we need a dependable creditor as the global financial system becomes skeptical of the US to make good on that debt.

If this is the thinking though than obviously China has an incentive to purchase US T-bills/bonds from other holders as they are measurably less risky in their hands then others, ESPECIALLY as the US debt:GDP ratio continues to increase.

[Faryn Balyncd]

17. Your data is quite accurate.

According to these Treasury statistics:

Total federal debt is approximately $14.1 trillion, with $9.4 trillion held by the "public" (which includes foreign entities), and $4.6 trillion held by intergovernmental holdings.

http://www.treasurydirect.gov/NP/BPDLogin?application=np


According to this Treasury source, as of October, 2010, total foreign holdings were $4.3 trillion, of which $895 billion were held by China:

http://www.treasury.gov/resource-center/data-chart-center/tic/Documents/mfh.txt



The 2010 Report of the SS Trustees showed that the most recent balance of the Old Age & Survivors Fund was a little over $2.3 trillion at the end of 2009. (The balance is required by law to be invested in Treasury securities.) :

http://www.ssa.gov/oact/TRSUM/index.html

[Statistical]

18. For full disclosure the only source of concern is the rate foreign ownership is growing.

Foreign ownership has been relatively level for last 30-40 years. In the last decade it has "exploded" from about 18% to 25% of total outstanding.

As we continue to run unsustainable deficits ($1.5 trillion a year currently) there isn't sufficient demand from domestic entities (including SSA Trust) so foreign entities buy an increasing share of new debt. This is slowly shifting the ownership profile.

After the economy recovers we need to get serious about balanced budgets.

[Faryn Balyncd]

19. Agreed...but we need to make clear that GOP wants to subsidize...

...general fund expenditures (which, {in addition to deficit financing} are financed via a modestly progressive income tax) with permanent and ever-growing loans from the SS Trust Fund (whose surpluses come from regressive payroll/self-employment taxes).

The GOP wants to slash SS benefits so low that the general revenue fund never has to pay back the SS Trust Fund. That is why the various "reform" proposals do not aim for simple ongoing "solvency", but for the goal of "sustainable solvency" which is defined as having positive and growing trust fund ratios, which will in fact result in ever growing trust fund balances, which will by law be loaned to the Treasury, allowing lower income tax rates than would otherwise be the case.

The GOP is misrepresenting the facts regarding SS because they want to continue their practice of lowering income tax rates at the high end by means of permanently growing loans from the payroll tax funded SS Trust Fund.

So I agree with you that, as the economy recovers, we should address the problem with deficits (and foreign financing), but I think we need to make clear that the GOP wants this to be done on the backs of beneficiaries of Social Security, who have paid 40 years of payroll and SE taxes, and we believe that we should honor the benefits that SS beneficiaries have earned, and balance the general revenue deficits through a tax that DOES NOT EXEMPT ALL REGULAR INCOME OVER $106K (as well as exempting all interest and capital gains income).



(For the most part, that means that, with the exception of spending reductions which may be effected by ending wars and reducing defense spending, that the revenue raised to reduce these general revenue deficits must come from the appropriate tax sources {primarily the income tax, which would mean an end to the tax cuts to the most affluent}, and NOT from raiding the surpluses of the payroll tax, whose taxes and surpluses would be used for their intended use.)

[NewJeffCT]

2. I would love to see somebody make an ad with that idea in it

Pay foreign governments and big corporations before you pay the American people. How red, white & blue of them.

[kentuck]

3. I have a better idea.

Pay back the Social Security first, then the Chinese.

[NutmegYankee]

22. There are many others that need priority as well.

Hell, imagine what would happen if we stopped the paychecks of the 2.7 million civil servants currently working for the government. That's a lot of lost spending for the economy.

[Angry Dragon]

4. Where were these people when bush was

spending trillions that were not there??
cheney said deficits did not matter....now they do??

[Segami]

5. How quickly the masses forget. Then they reward these criminals by

voting them back into office so they can continue implementing this scourge.

[dixiegrrrrl]

6. Even *needing* to raise the debt ceiling, again, is an admission of insolvency.

China understands that.
I do not think many Americans do.

[guruoo]

7. Let them do it...

[liberal N proud]

8. Another right wing myth to support their entitlement killing plans.

The media propagates the message and the morons repeat it so it must be true.

:nuke:

[Lorien]

9. They aren't "entitlements", they're social programs

"Entitlements" came from Reagan; a buzzword used to paint social programs in a negative light. We need to call social programs what they really are again.

[liberal N proud]

11. My slip

But that shows how they frame the text and make it everyday language.

Thanks for catching me on it.

[lumberjack_jeff]

24. I think they ARE entitlements.

Those of us who purchased insurance with our social security taxes are entitled to the benefits should we meet conditions of that insurance.

Entitlement shouldn't be a bad word. Government has a legal obligation to us workers.

[toddwv]

10. It's more like "Pay the Wealthy First, Screw Everyone Else"

Wow, really seems like the right is getting overconfident again and dropping the thin veil that hides their corporate funded agenda.

So we pay the interest first which is pure profit for the large companies, banks and uber-wealthy while children go hungry, elderly go without medicine and medical care and those that just retired watch their meager savings vanish because the gov can't legally print their monthly check.

I seriously can't understand what goes through anyone's head these days who is lower or middle class and votes Republican. It baffles the mind.

[jtown1123]

15. This is a non-issue since Repubs don't want to scare the bondholders and stock market

CALL...THEIR...BLUFF. Clinton did and they caved immediately.

[LynneSin]

16. Geez, this dingbat

:grr:

hopefully he's a one-termer.

[Ikonoklast]

20. And once again, Republicans grandstand for the Teabaggers.

That's all this is, after the Teabaggers bellowed about the national debt, none of which they even understand remotely.

Toomey will get to tell them he did his best, and pray he doesn't get primaried by a Teabagger in five years.

[Faryn Balyncd]

21. The fact is, the GOP is doing this precisely so they can FORCE a default SELECTIVELY on SS Trust ..

....Fund bonds.

They think they can get away with that, and they want to set the stage so they can give the shaft to SS recipients.


If Reid does stop this COLD in its tracts, he will be enabling the GOP showdown regarding the debt ceiling.


For the GOP to force the issue is suicidal for our nation. We should not enable them by making the horrible consequences more to their liking.

[SpiralHawk]

23. Why do Republicons & Baggers always crap on America and Americans?

Ptooooey on Republicon anti-patriotism.