Monday, November 8, 2010

The Debt Cap and Spending Cuts

The Wall Street Journal reports that Republicans plan to use the debt cap as leverage to push spending cuts:
Republicans are planning to demand major spending cuts next year before they would agree to raise the amount of federal debt that can be issued, setting up a clash between the Obama administration and a Congress stocked with lawmakers who campaigned as deficit hawks.

The U.S. can't accrue debt above a certain ceiling set by lawmakers. In the most extreme scenario, the government would default on certain debts if the cap doesn't move.
This might precipitate a replay of the mid-90s government shutdown. The Republicans were punished for that shutdown. One important difference today is that the unemployment rate inside the beltway is about 6%. With  higher unemployment everywhere else and simmering anger directed at Washington, I think a shutdown might play well this time around. After all, do we really need all of these agencies overseeing our financial system if we just print the money we need anyway?
  1. US Treasury
  2. Federal Deposit Insurance Corporation (FDIC)
  3. Federal Reserve ("The Fed")
  4. Office of the Comptroller of the Currency (OCC)
  5. Security and Exchange Commission (SEC)
  6. Bureau of the Public Debt
  7. Community Development Financial Institution Fund (CDFI)
  8. Financial Crimes Enforcement Network (FinCEN)
  9. Federal Inspectors General
  10. Office of Thrift Supervision (OTS)
  11. National Credit Union Administration (NCUA)

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