Open Email to Rep. Tim Huelskamp (KS):
Dear Rep. Huelskamp,
Dear Rep. Huelskamp,
Congratulations for what I'm about to
explain!
According to the Washington Times, House Speaker Boehner proposed an increase in the government debt limit and approval of government spending while attaching a few strings. The general interpretation of this offer was considered very favorable to the Democrats and the President. In spite of that, Pres. Obama said that he would veto the bill. Simultaneously, it is said that a group of conservative Republicans in the House registered such strong objection, that the bill was not developed. The conservative Republicans were not named in the Washington Times article, but by implication, you are one of them. It is reported that you told CNN news that the bill was going to raise the debt ceiling hundreds of billions of dollars with no change in spending.
Not raising the debt limit should have no effect on ability to pay current interest on government bond debt, since there is adequate tax revenue to cover this. However, the option to pay lies with the Treasury Department, and it could arbitrarily decide not to pay the interest, which is doubtful.
However, other government debt obligations might be adversely affected, for which reason one of the three existing credit rating agencies has said that not raising the debt limit could be a precursor for downgrading the credit worthiness of the government, which would increase required interest rates for new government bond issues. It should also be noted that the other two credit rating agencies have so far been noncommittal. The obvious reason is that it is clear to any financial analyst that a continual raising of a credit limit, without some plan of repaying the debt, will eventually end in disaster, at which time the credit worthiness of the borrower will be essentially zero and interest required on any future issues of government bonds will be sky high. For example, the insolvency problem in Greece caused new government bond interest to rise to 18%. It is now down to 8%, because of European Union support., But if the US follows the same pattern who will there be to support the US?
Net conclusion. Thank you, Rep.Huelskamp and your conservative associates, for trying to bite the bullet now, in order to avoid future real default with sky-high interest rates equivalent to what Germany suffered after World War I.
According to the Washington Times, House Speaker Boehner proposed an increase in the government debt limit and approval of government spending while attaching a few strings. The general interpretation of this offer was considered very favorable to the Democrats and the President. In spite of that, Pres. Obama said that he would veto the bill. Simultaneously, it is said that a group of conservative Republicans in the House registered such strong objection, that the bill was not developed. The conservative Republicans were not named in the Washington Times article, but by implication, you are one of them. It is reported that you told CNN news that the bill was going to raise the debt ceiling hundreds of billions of dollars with no change in spending.
Not raising the debt limit should have no effect on ability to pay current interest on government bond debt, since there is adequate tax revenue to cover this. However, the option to pay lies with the Treasury Department, and it could arbitrarily decide not to pay the interest, which is doubtful.
However, other government debt obligations might be adversely affected, for which reason one of the three existing credit rating agencies has said that not raising the debt limit could be a precursor for downgrading the credit worthiness of the government, which would increase required interest rates for new government bond issues. It should also be noted that the other two credit rating agencies have so far been noncommittal. The obvious reason is that it is clear to any financial analyst that a continual raising of a credit limit, without some plan of repaying the debt, will eventually end in disaster, at which time the credit worthiness of the borrower will be essentially zero and interest required on any future issues of government bonds will be sky high. For example, the insolvency problem in Greece caused new government bond interest to rise to 18%. It is now down to 8%, because of European Union support., But if the US follows the same pattern who will there be to support the US?
Net conclusion. Thank you, Rep.Huelskamp and your conservative associates, for trying to bite the bullet now, in order to avoid future real default with sky-high interest rates equivalent to what Germany suffered after World War I.
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