Keep looking at the birdie

[solarbird]

Good morning.

The Senate will vote today on the bailout package, by voting to amend it to a previous bill passed by the house. This unusual action is required because all spending bills must originate in the House of Representatives, and this amendment route is a parliamentary trick around that. The bill could then go back to the House for a

Comments

[llachglin]

Thanks for your articulate summary.

My less articulate but shorter summary: no matter what we do, we are fuuuucked.

[peakoilchaplain]

Do any of the alternate bail-out plans that have been floated do anything to resolve this root problem - namely, that the U.S. is deeply, deeply in debt to the rest of the world, and the bill is coming due?

[solarbird]

Not insofar as I am aware. Social Security is still too much a hot button, of course, but everyone knows eventually benefit start age will be raised and the tax will have its income cap removed. (Senator Obama has been talking up this last one.) Spending must go down (dramatically) and taxes must go up (significantly, particularly for higher income brackets), or at least not get cut (overall), and nobody is willing to talk about either of these, particularly in a recession.

Currently they're nibbling around the edges - Medicare no longer covers care for in-hospital acquired infections, for example, and is planning on cutting coverage for medical work caused by doctor mistakes. (Presumably the doctor's or hospital's insurance would pay that - if you have a lawyer, anyway.) You'll probably see more of that sort of thing.

Generally, the cure is an austerity programme of substance. Nobody's going to talk about that until they have to.

[peakoilchaplain]

My guess is that nobody will talk about it, ever. Instead, we'll get default on U.S. debt (either overtly or via inflation/dollar crash), and then the rest of the world will stop trading with us (and hate us, as a bonus), and then the austerity plan will be that we all realize that we are a lot less wealthy nation than we had imagined.

This is not pretty ...

[solarbird]

Nah, nah, there will still be trade. There's trade between Israel and the Arab states, there'll be trade with the US too, lots of it.

[kensaro]

I'm wondering just how much of the policies to get the US 'self reliant' over the past few years have been an attempt to do just that in case the US default on their debt and have to spend the next few decades fending for themselves until the rest of the world forgets just how much they got screwed.

[solarbird]

Policies to get the US self-reliant? What policies? There've been policies?

[kensaro]

Well, blahblah, drilling in the arctic, rethoric, yannknow.....

[solarbird]

Ah, by which you mean lies. Okay.

[denelian]

so... and maybe someone slipped me some hallucinagens... but what about all the money other countries owe the US? we spend billions in foreign aid to many (mostly 3rd world) countries...
what happens with those? can we, perhaps, transfer that theoretical money, i mean trade those for money we owe? like, say, sell China the debt from Venezuala? is that even a viable option?

it's a thing that has bugged me for years... we operate on a huge double deficit, and STILL loan money to other countries...

[solarbird]

US foreign aid is trivial against total US debt. The US is the world's largest debtor nation and has been for several years now.

[denelian]

really? i thought it was a little closer to even...
it was a thought

[solarbird]

That is a popular American misconception. In reality, out of the US budget of around $1.5 trillion, international assistance runs under $10B, or less than 0.7% of the US budget, or around 0.1% of the debt.

Here is a little chart to put some of these pieces into perspective.