PR NEWSWIRE) U.S. Government on the Brink of Bankruptcy;
Lawmakers Face a Difficult Choice - Go Deeper in Debt or Default on Loans
BALTIMORE, Jan. 6 /PRNewswire/ -- The U.S. government is about to reach
the $8.18 trillion borrowing limit it set for itself by law. If Congress does
not enact a new borrowing limit soon, the government could default on its
financial obligations as early at March. But a new borrowing limit just means
the government will go deeper in debt.
The Treasury Department has already warned Congress of the danger. In a
Dec. 28, 2005, letter, Treasury Secretary John Snow states, "the statutory
debt limit, currently $8.184 trillion, will be reached in mid-February 2006
... {U}nless the debt limit is raised or the Treasury Department takes
authorized extraordinary actions, we will be unable to continue to finance
government operations."
The last time the United States faced this situation was in the fall of
2004, when the federal government met its $7.4 trillion debt ceiling. That
time, the Washington Post reports, Treasury Secretary John W. Snow was forced
"to delay contributing to one of the federal employees' pension systems."
Addison Wiggin, Editorial Director of The Daily Reckoning and co-author of
the best-selling book, Empire of Debt, says the government is in a no-win
situation. And the biggest losers will be the American people.
"We're already over $8 trillion in the hole," he says. "That won't just
disappear. But Congress doesn't seem to care. They'll be gone before this
massive bill comes due."
In Empire of Debt, he and co-author Bill Bonner explain that only the
government could get away with such a scheme. "A father would not have dinner
in a fine restaurant and send the bill to his son," they write. "Nor would he
say to the restaurateur: Hold the bill for my unborn grandson."
But the situation is even worse, Wiggin says. "We're rapidly approaching a
time when the United States will have so much debt, its creditors will get
nervous. They'll stop buying Treasuries, and instead will demand their money
back. If that happens, Congress will need a way to generate cash - quick."
At least two U.S. Congressmen agree.
After raising the debt limit in 2004, Rep. Ron Paul of Texas wrote,
"Increasing the national debt sends a signal to investors that the government
is not serious about reining in spending. This increases the risks that
investors will be reluctant to buy government debt instruments. The effects on
the American economy could be devastating."
Sen. Russell Feingold also agrees that more debt is not the answer. In a
letter to The Daily Reckoning, he warns, "we are facing budget deficits for
years to come, and it is crucial that we prioritize spending what little
federal dollars we have." Unless something is done, "we will continue to see
unlimited spending, unlimited tax cuts and more debt for our children to pay
off."
If Congress does decide to increase the debt limit again, it will be the
fourth such move during President Bush's presidency. In addition to 2004, the
debt ceiling was raised in 2003 and 2002. As Paul says, the United States has
amassed "$1 trillion of new debt in just one year. By contrast, the entire
federal debt was only $1 trillion when President Reagan took office in 1981."
"The Bush administration promises to cut spending, yet it is still
borrowing out of control," says Addison. But he doesn't place the blame
entirely on the White House.
"With the exception of Ron Paul and Russell Feingold, most politicians
have remained quiet on this. That tells me that Congress will just roll over
and pass a higher debt limit, without considering the consequences."
In the long run, Wiggin says, "our children might be better off if America
accepted bankruptcy now."
For more from Addison Wiggin and Bill Bonner, see
dailyreckoning.com .
Addison Wiggin is editorial director and publisher of The Daily Reckoning.
He is also the co-author, along with Bill Bonner, of the recently released New
York Times bestseller, Empire of Debt: The Rise of an Epic Financial Crisis.
Brought to you by Agora Financial, and written by the NY Times best-
selling authors, Bill Bonner and Addison Wiggin, The Daily Reckoning is a
daily, free e-letter that weaves information about the financial world,
investing and everyday life into an educational and entertaining format that
has been engaging their readers for over six years.
SOURCE www.dailyreckoning.com
Contact Information:
Kate Incontrera, www.dailyreckoning.com, +1-410-230-2109, or
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WebSite:
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