“A man’s mind will very gradually refuse to make itself up until it is driven and compelled by emergency” – Anthony Trollope
I have three kids, ages five, three, and one. The one-year-old is still in diapers, but the five-year-old and three-year-old use the toilet like everybody else. Well, not exactly like everybody else, but that is the intent. Being young as they are, bladder size and even control are somewhat suspect. The five-year-old can give you enough heads up that something needs to happen soon, but the three-year-old has a very short time window from “I have to” until “I need new clothes”.
With that one, it is a fundamental – empty the bladder before we get in the car. Not one to play favorites, the rule goes for just about everybody. It’s not like “Daddy I need to pee-pee” is a tragedy. Daddy, being a common redneck, has little compunction about shucking the boys out (they’re all boys, by the way) on the side of the road to pee in the ditch. Still, we know we’re going to be in the car for a while, we may as well take all reasonable precautions to extend the potential time of peaceful car ride as long as possible.
With the under-card finishing with a less-than-impressive split-decision on the scorecards, the federal budget watchers turn their attention to the impending debate (conflict?) over the 2012 budget. This one could, perhaps, be more interesting, more tense, more severe. Unlike the 2011 continuing resolution, where I claim the Republicans laid down for the Democrats and gave them everything and more; the 2012 debate is about an actual budget bill, and has an impending debt-ceiling threshold as a kicker. The interesting twists are all over the map on this one.
Back story: we have an estimated $3.82 trillion budget with $2.17 trillion in revenues – a $1.65 trillion deficit. For every $1 of legitimate revenue, the federal government will borrow an extra 76 cents to fulfill its spending commitments. The federal government also has a debt-ceiling, that currently lets the federal government borrow up to $14.294 trillion and no more. We will cross that threshold sometime in mid May.
From a budget standpoint, the Republicans are attempting to act as though they have more conviction this time than they did, umm, one week ago. I personally doubt it. That said, the debt-ceiling comes into play well before the end of the fiscal year, and could possibly change the debate a bit. Conservatives are claiming that any increase in the debt-ceiling must be linked to passage of serious spending cuts (a move I would applaud).
Again, I personally doubt there will be any actual showdown here. Republicans gave in for almost nothing just a few weeks back, just to avoid a simple government shutdown. The political ramifications are much bigger this time.
Having said that, there are still possible outcomes that involve a very serious showdown over the debt-ceiling. Intrade is currently listing the odds of a debt-ceiling increase to $15.1 trillion by various dates as follows:
- Midnight, 31 May 2011: 24%
- Midnight, 30 June 2011: 75%
- Midnight, 31 July 2011: 85%
So you see, the markets believe there is a three-in-four chance that the debt-ceiling will not be raised by 31 May. Remember that the current limit is only good until somewhere mid-May, so this puts us over the mark. Now, the Treasury has about eight weeks worth of “extreme measures” before it really gets tight, so mid-July is really crunch time. The Intrade markets say there is a 15% chance that we will not increase the borrowing limit by then.
So, what does it really mean if we fail to raise the debt limit? Well, it is not necessarily armageddon, as Tim Geithner would have you believe. What it really means is that the Treasury department can only pay bills with the revenue it receives. This is not the same as the U.S. defaulting on its debt. We can certainly service the interest payments on all the existing debt with the revenues. It does mean that somebody will not be getting paid – the question is “who?”
The U.S. government has shown consistently that it will bail out the wealthy whenever possible – so I suspect interest payments on existing debt will be made. The government also is quite loathe to leave military personnel hanging. We may well start bringing them home and stop paying for combat operations – but salaries and benefits we’ll probably try to maintain (that’s just a guess though). Who else? Well, the money’s starting to get tight at this point. Welfare, Medicare, Medicaid, Social Security – these payments may be cut significantly. It is guaranteed that somebody who is counting on a government check will not receive it. There will be hardship.
(In a manner of speaking, this would be the ultimate in balanced budget amendments. “You don’t have to balance the budget – you just can’t borrow any more money … so, yeah, you have to balance the budget”)
What does this have to do with car trips? When you find yourself in a situation where there’s a 15% chance (according to Intrade markets) that the federal government will begin spending only 57% of what it currently does, you might want to plan ahead. If you currently get a check issued by the government, you ought to have some contingency for the prospect that the check may be reduced significantly (or totally).
The consequences are certainly more far reaching than this. The World Bank president recently stated that the world is “one shock away from a full-blown crisis”. I’ll defer to economic prognosticators on the ramifications though. Of course, long-term, a balanced budget would be a tremendous economic benefit, so don’t panic too much. But if you’re early in the flow path of money out of the Treasury, well it’s a good time to think ahead. It’s a good time to empty the bladder before we get into the car.